MUMBAI: The Indian rupee fell to a record low against the US dollar on Friday pressured by a drop in the offshore Chinese yuan and aggressive local dollar demand close to the end of the session, traders said.
The rupee ended at 83.4250 against the US dollar - its lowest closing level on record - down 0.3% from its close at 83.1475 on Thursday, and marginally higher than the record low of 83.43 touched near the end of the session.
The rupee logged a near 0.7% decline for the week, its sharpest weekly fall in seven months.
Traders pointed to a lack of substantial dollar inflows, a drop in the offshore Chinese yuan, and dollar strength as reasons behind the pressure on the rupee on Friday.
An “artificial dollar scarcity” in the market, reflected in the depressed overnight dollar-rupee swap rate, also contributed to the rupee’s losses, a foreign exchange trader at a foreign bank said.
While the Reserve Bank of India had sold dollars earlier in the session near 83.38-39 levels, it appeared the central bank was absent near the end of the session, traders said.
The dollar index was up 0.4% at 104.39 after hitting a month high earlier in the session.
Asian currencies fell with the Korean won leading losses down by 1.2%. The offshore Chinese yuan also dropped to its weakest level since November.
Yuan “weakness reflects increased jitters over geopolitical risks that have seemingly resurfaced,” DBS Bank said in a note.
The closing days of March are likely to be “critical” for the rupee after Friday’s price action, said Abhilash Koikkara, head of foreign exchange and rates at Nuvama Professional Clients Group.
If the rupee continues to hover near record-low levels over the next few days, the bias on the unit is likely to turn negative, Koikkara added.
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