Indian Rupee Faces Pressure Amid Dollar Surge
MUMBAI, Oct 8 – The Indian rupee may approach a record low as it opens on Wednesday, influenced by the dollar index reaching a six-week high and the overall weakness in Asian markets, potentially leading to more central bank interventions.
One-month non-deliverable forwards suggest the rupee will start between 88.78 and 88.82 against the US dollar, following a Tuesday close at 88.7725.
The rupee previously hit an all-time low of 88.80 rupees last Tuesday. However, it has managed to stabilize in the days since, partially due to aggressive action from the Reserve Bank of India (RBI).
Bankers noted that to mitigate the effects of its interventions, the RBI is also selling dollars in the spot market and using buy-sell swaps. This has contributed to reduced intraday volatility, keeping the rupee fluctuation within a sub-10 paisa range this week.
A forex trader in Mumbai mentioned that the RBI is actively defending the 88.80 level. “But the demand for dollars remains strong. Today’s market action will be crucial to see how well that level is maintained,” he added, suggesting that the initial movements post-opening could set the day’s trend.
Dollar Index and Yen Influence
The dollar index rose 0.5% on Tuesday and added another 0.3% in early Asian trading on Wednesday, nearing a six-week peak of $99. A weaker yen has played a significant role in this increase, with the yen at its lowest value since February amidst speculation about Japan’s upcoming prime minister, Sanae Takaichi.
Takaichi’s recent win has raised concerns for the yen as the interest rate market anticipates a hike from the central bank this year, with some analysts predicting it could be as early as March 2026.
This decline in the yen appears to impact other Asian currencies as well.
Main indicators include:
- 1-month non-deliverable rupee forward at 88.94 rupees, with an onshore 1-month futures premium of 14 paise
- Dollar index at 98.82
- Brent crude oil futures up 0.8% at $66 per barrel
- US 10-year bond yield at 4.13%
- Foreign investors sold a net of $165.8 million in Indian stocks on October 8, while purchasing a net of $36.7 million in Indian bonds on the same day, as per NSDL data.
