The Indian rupee closed weaker against the US dollar on Monday. The local currency weakened by 2 paise to close at Rs 86.85 against the greenback, according to Bloomberg. It had closed at Rs 86.83 on Friday.
"The three-month ATMF implied volatility cooled off to 3.90%. While the one-month forward yield ended at 2.23%," Abhishek Goenka, chief executive officer of India Forex & Asset Management (IFA Global), said.
The rupee's resilience is likely due to the RBI's intervention on both sides — accumulating reserves at lower levels and selling forwards at higher levels to stabilise excessive rupee depreciation. As a result, India's forex reserves saw a significant rise of $7.65 billion, reaching $638.26 billion for the week ended Feb. 7, according to Amit Pabari, managing director of CR Forex Advisors.
However, ongoing foreign-institutional-investor outflows continue to exert pressure on the rupee. The RBI's decision to double its government securities purchase target to $4.61 billion could impact liquidity conditions, influencing the rupee's trajectory. Potential tariff tensions from the Trump administration towards India remain a key risk factor, he added.
The 87.20 level is emerging as a strong resistance, while 86.50 is acting as a critical support zone. A breach of this will pave the way towards the 86 level, according to Anil Bhansali, executive director of Finrex Treasury Advisors LLP.
Crude oil prices drop to a nearly two-month low amid hopes for a peace deal between Russia and Ukraine, which, in turn, could end sanctions against Russia and ease global supply disruptions. Dollar was unable to recoup its losses after it fell on Friday based on weaker-than-expected retail sales data.
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