The Indian rupee fell for a fourth consecutive session this morning, falling to its weakest level in eight weeks, as dollar demand by the country’s importers continued to squeeze the Indian currency.
The rupee has broken its 100-day moving average of 50.87 to $1, and traders said they expect the Reserve Bank of India (RBI), the country’s central bank, to step as the USD/INR rate has hit the 51 level.
If the downtrend persists, the RBI may intervene and sell US dollars to prop up the currency. The RBI reportedly sold more than $15 billion in December 2011 and January 2012, a period that saw the Indian currency sliding to a lifetime low of Rs14.62 versus Dh1 on December 16, 2011.
Experts maintain the Indian currency could stay put in a narrow range at the current levels during the day, even as any RBI intervention will see it claw back some of its losses.
The oil price retreated yesterday on Saudi Arabia’s assurance to keep the supply taps on in case of a disruption in Iranian supplies, they are still up 15 per cent year-to-date, something that is squeezing oil importers and putting downward pressure on their currencies.
Increased uncertainty about the RBI’s policy rate cut is affecting India’s stock markets negatively and even the rupee. The Indian rupee is currently trading at Rs50.88 to $1, and with the greenback gaining momentum in the recent past, these levels are likely to remain steady.
Nevertheless, analysts maintain that, in the short term, the rupee is unlikely to drop or surge from the current levels in the absence of an external trigger.
