The Indian rupee fell to its weakest level in a month on Wednesday, near its all-time low, though losses were contained by likely central bank intervention that blunted pressure arising from persistently high crude oil prices.
The rupee declined to a low of 94.80 per dollar in early trade, before paring losses to last quote at 94.73, down 0.2 per cent on the day. The South Asian currency hit an all-time low of 95.21 per dollar in late-March.
Dollar sales by state-run banks, most likely on behalf of the Reserve Bank of India, helped limit the currency’s fall, traders said.
The central bank has intervened frequently in recent sessions and traders characterize the activity as likely being aimed at curbing volatility as opposed to anchoring the currency at a specific level, in line with the RBI’s often stated policy on currency management.
While the 94.80 per dollar level may hold on the day, “there is significant dollar buying pressure as well, so all dips (on USD/INR) will get bought into,” a trader at a Mumbai-based public sector bank said, asking not to be identified as they are not authorized to speak to the media.
In global markets oil-sensitive Asian currencies continued to face pressure, with the Indonesian rupiah hitting a record low, as Brent crude oil futures perched above $110 per barrel.
Later in the day, the focus will be on the US Federal Reserve’s policy decision.
The Fed is widely expected to keep rates unchanged, but focus will be on commentary around how policymakers expect the war with Iran to impact the world’s largest economy.
“Our base case is for a neutral statement in Powell’s last FOMC chaired event, and for Powell to continue to say they need more data to assess the full impact of disruptions to energy and energy related prices,” analysts at MUFG said in a note.