Rupee breaches 89/$ mark, worst 1-day drop since May
Offshore rates weakened toward 89.86, as strong dollar demand and portfolio outflows overwhelmed the currency.
Dealers said sentiment was hit after reports that Indian individuals and companies were sanctioned by the US State Department for enabling Iranian crude oil sales.
RBI governor Sanjay Malhotra had said on Thursday that the central bank does not target any level for the rupee.
While the RBI stayed away from intervention earlier in the day, it stepped in once the 89 level was breached.A steady dollar index, supported by stronger-than-expected US non-farm payroll data and hawkish commentary on delaying rate cuts, added pressure.
“The currency is now among the weakest major Asian performers this year, as foreign investors have withdrawn $16.5 billion from Indian equities so far,” said Rahul Kalantri, VP Commodities, Mehta Equities.
“We expect the rupee to weaken further towards 90.40 and 91 levels, while the key support remains at 88.45,” he added.Traders said a technical-driven move rather than fresh negative news caused the sharp fall.Steep US tariffs on Indian exports since late August have already hit trade flows, with shipments to the US down 9% year-on-year and the merchandise trade deficit at a record high.
