The Indian rupee settled near an all-time closing low against the greenback despite dollar sales by the Reserve Bank of India (RBI) as investors sold the local currency following the release of trade deficit data, which was higher than market expectations, dealers said.
The Indian unit settled at 83.18 a dollar against 83.04 per US dollar on Thursday. It depreciated significantly by the end of the trade after moving in a narrow range for a large part of the trading session.
“The momentum in USDINR from 83.05 a dollar to 83.18 a dollar came as a result of a knee-jerk reaction after India’s trade deficit. As there was a huge dollar short position in the non-deliverable forwards (NDF) around 83.10 a dollar, the stop loss got triggered, leading to a sharp rise in the USD-INR pair. The key resistance zone to watch would be around 83.25-30,” said Amit Pabari, managing director at CR Forex.
Meanwhile, the surplus liquidity in the banking system fell to Rs 2,696 crore on Thursday ahead of the second tranche of incremental cash reserve ratio disbursement on September 23.
Market participants believe the liquidity might fall into deficit mode once again if the central bank does not conduct a variable repo rate (VRR) auction. “We might see liquidity falling into deficit mode once again if the RBI does not come up with VRR. The second tranche is scheduled, but Rs 25,000 crore would not be enough,” a dealer at a primary dealership said.
The trade deficit stood at $24.16 billion in August, against the market expectation of $21 billion.
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“Foreign portfolio investors (FPIs) and oil companies did not allow any gains to the rupee despite constant selling by the RBI at 83.07. The rupee was in a range of 82.99 to 83.20 since morning, and with oil ruling higher, FPIs have been constant sellers of equities and buyers of dollars,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.