The Indian rupee weakened to a record closing low against the US dollar to reach INR83.57 per dollar, forcing India’s central bank to intervene to check further plunge in the currency.
Weakness in other Asian peers also added to the downward spiral of the Indian currency, traders said.
India’s central bank likely intervened in the non-deliverable forward market before the local spot market opened on Wednesday, to prevent the rupee from dropping to an all-time low, Reuters reported, citing market traders.
The rupee was at INR83.55 to the US dollar in the morning trading hours on Wednesday, only marginally away from its all-time low of INR83.5750.
The currency, which opened at INR83.54, would have probably opened at a new low if not for the Reserve Bank of India’s intervention, traders said.
The dollar sales, however, helped cap further sharp losses, traders said.
Choppy trading last week due to the national election results spurred increased hedging from importers and exporters, data from a local clearing house showed.
Most Asian currencies slipped on Tuesday, with the Korean won down 0.2 percent, leading the losses.
The dollar index was slightly higher at 105.2.
The dollar index will need to close below “gap support” at 104.95 to reverse an otherwise bullish near-term outlook, ING Bank said in a note.
Traders awaited the US Federal Reserve’s policy decision, due Wednesday, where the central bank is expected to keep rates unchanged.
Attention will be on Fed Chair Jerome Powell’s remarks and changes to the interest rate dot plot.
The crucial US consumer inflation data is also due on Wednesday.
Economists polled by Reuters have forecast that month-on-month core CPI held steady at 0.3 percent in May.
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