By Jaspreet Kalra
MUMBAI(Reuters) -The Indian rupee spent much of Monday’s trading session within striking distance of its all-time low, but managed to hold above the level on the back of likely dollar-selling market intervention by the central bank.
The rupee closed at 88.7775 against the U.S. dollar, nearly unchanged on the day and a whisker away from its record low of 88.80 hit in late-September.
The Reserve Bank of India was likely active through much of the session, according to traders, while persistent dollar bids from importers and foreign banks kept the local currency in a sub-5 paisa trading range.
Over the past year since President Donald Trump’s return to the White House, the rupee has declined over 5% as investors grapple with stark shifts in U.S. trade and immigration policies.
More recently, a hawkish turn in the Federal Reserve’s policy outlook and dollar demand, spurred by the maturity of positions in the non-deliverable forwards market, have become a sore spot for the local currency.
“The USD appears to be bottoming out in the near term, with bearish positioning starting to normalise and scope emerging for a short squeeze,” analysts at Standard Chartered said in a note.
Their counterparts at Goldman Sachs hold a moderately positive bias on Asian currencies and are recommending a bullish position on the Indian rupee, using an exotic option structure, despite its latest slide towards its all-time low.
Traders expect the RBI to continue intervening to support the rupee in the near-term. While a fall to 89-89.10 cannot be ruled out, recent price action indicates that the central bank certainly won’t allow a quick decline of the rupee, a trader at a private bank said.
Elsewhere, the dollar index was perched near a three-month high on Monday, while Asian currencies were flat-to-modestly weaker.
(Reporting by Jaspreet Kalra; Editing by Sonia Cheema)
