Rupee recovers a bit after strong dollar demand pushes it to all-time low of 85.81

Strong dollar demand pushes rupee to all-time low, recovers post-RBI intervention

Indian rupee touched an all-time low in the afternoon trade at 85.81 against the US dollar, but recovered sharply after the intervention by the Reserve Bank of India (RBI) in the spot market, experts said.

The local currency depreciated sharply after the strong demand amid expiry of December currency futures and month-end demand from importers, experts said.

Currency experts added that strong dollar demand in the non-deliverable forwards (NDF) market also put pressure on the rupee.

Indian rupee traded at 85.8100 against the US dollar during December 27 afternoon, as against 85.3200 at open and 85.2700 close on the previous trading session against the greenback.

Post-RBI's intervention, it recovered to 85.53 against the US dollar.

For the year so far, the rupee has weakened by 3 percent against the US dollar.

"Rupee fell to to its all time low of on the back of dollar buying related to the expiry of the December currency futures contract and maturing NDF positions as well as month end dollar demand," said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The rupee has been making record lows, after the November trade deficit expanded more-than-expected to touch a record high of $37.8 billion. India's export growth has been impacted by a weakening of global demand, even as imports remain elevated.

The Finance Ministry, in its latest monthly economic review, has highlighted risks to global growth, adding that global trade in 2025 is increasing looking uncertain amid threats of higher tariff by the incoming administration of US President-elect Donald Trump.

The ongoing geopolitical tensions have increased risk aversion, leading to a flight to safety in currencies like the Dollar, thus adding to pressure on EM currencies. India's foreign exchange reserves have risen by $6.4 billion during FY25 so far to a level of $652.9 billion as of December 13, 2024. The Finance Ministry said the reserves are sufficient to cover for more than 11.