Rupee hits a new low of 85.93 against dollar in early trade, recovers on RBI intervention

Rupee

The Indian rupee opened at a new low on January 9 due to strong dollar demand but pared some of the losses on likely intervention by the Reserve Bank of India (RBI), currency experts said.

At 11.15 am, the local currency was trading at 85.89 against the dollar after opening at 85.93, a new low. The rupee closed at 85.86 in the previous session.

The currency was hit due to rise in yield on the US treasury notes. The 10-year US treasury yield hit a peak of 4.73 percent the previous day, its highest since April 2024, before edging lower in Asia trading.

Expectations of cautious rate cuts by the Federal Reserve amid the potential inflationary impact of incoming US president Donald Trump’s policies have pushed up the dollar and bond yields in recent weeks.

Outflows from the Indian equities have also weighed on the local currency.

At about 11.25 am, the Sensex was down 400.82 points, or 0.51 percent, at 77,747.67, and the Nifty was down 122.70 points, or 0.52 percent, at 23,566 from the previous day.

Amit Pabari, MD at CR Forex Advisors, said foreign institutional investors (FIIs) have maintained a selling stance, driven by global risk aversion and weaker domestic data.

Expectations are high that the government will ramp up spending on infrastructure and public projects this year, especially since last year’s spending was constrained due to the general elections, he said.

In the first eight months of the current fiscal, government expenditure amounted to Rs 27.41 lakh crore, representing just 57 percent of the total budget. An increase in spending will provide the much needed support for the economy as well as the rupee.

“Given the factors, as long as the pair trades above 85.60 to 85.70, the pressure on the rupee is likely to persist with the strong resistance at 86.20. A close below 85.70, and especially below 85.50 could signal a potential pause in the uptrend,” he said.