The Indian rupee declined to its lifetime low on Monday, hurt by a persistent bearish outlook on the South Asian currency that has been troubled by a broadly stronger dollar and tepid capital flows following a slowdown in economic growth.The rupee weakened to 85.84 against the U.S. dollar, inching past its previous record low of 85.8075 hit in the last week of December.
The currency ended the session at 85.8275, down nearly 0.1% on the day.
While the rupee remained under pressure throughout the day's trading session, dollar-selling intervention by the Reserve Bank of India helped limit losses, traders said.
"It seems like the RBI will hold it (USD/INR) below 86 before Trump's inauguration later in January," a trader at a foreign bank said, referring to the start of U.S. President-elect's term on Jan. 20.
The dollar index was down 0.3% at 108.5 on Monday, retreating from an over two-year high, but that did little to help the local currency in the face of strong dollar bids in the local spot and in the non-deliverable forwards (NDF) market.
"The proximity to Trump’s inauguration and the strong underlying narrative of a hawkish Fed may well keep any USD correction short-lived," ING Bank said in a note.
The 110 target for the dollar index remains "very much at reach," in the coming weeks, the note said.
Dollar demand from foreign banks, likely on behalf of custodial clients, also weighed on the rupee during the session, traders said.
Benchmark Indian equity indices, the BSE Sensex and Nifty 50 ended the day lower by 1.6% each. Foreign investors have sold $1.1 billion of local stocks and bonds over January on a net basis so far, according to stock depository data.
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