Rupee Settles At Record Closing Low On Buying Pressure From Importers

The Indian rupee settled at a record closing low of 88.44 against the US dollar on Thursday, in line with the weakness in its Asian peers on the back of buying by importers and banks, three treasury officials said.

The Indian unit closed 34 paise down at 88.44 a dollar during the day. Intraday, the rupee fell 36 paise to record low of 88.46 against US dollar. On Wednesday, it had closed at 88.10 a dollar.

Looming uncertainty from US tariffs on India and its impact led banks and importers to buy dollars, a senior treasury official said, adding that may be debt outflows from foreign portfolio investors also weighed.

So far in September, FPIs have pulled out $346.21 million from the domestic market, on a net basis.

There was no intervention from the central bank. Market participants were expecting the Reserve Bank of India to intervene at 88.50 a dollar, the treasury official said.

Traders expect the RBI to keep the rupee weaker in the near-term in order to help exporters from the impact of US tariffs.

"As pet market sources, FPIs are said to have been selling bonds and even Asian currencies were weaker in intraday trade today. There is not much support for the rupee right now, so doesn't make much sense for the RBI to intervene at the moment because of tariff overhang," Ritesh Bhansali, deputy chief executive officer at Mecklai Financial Services, said.

In the near term, traders expect that the rupee has the potential to touch 89.25-89.50 levels as the bearishness bias remains.

"Till the time we do not hear any clarity or positive news on the tariff front, sentiment towards rupee would remain negative and depreciation would continue for some more time," Bhansali said.

Traders were also cautious ahead of the US inflation data for August scheduled for Thursday to understand the impact of tariffs ahead of the US Federal Reserve's policy outcome next week.

Fed funds futures traders are now pricing in a 92% chance of the Fed cutting interest rates by 25 basis points next week, with an 8% probability of a jumbo 50 bps cut, CME FedWatch showed.