Rupee hits record low of 87.59/$ on tariff, outflow worries
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Indian rupee closed at a record low of 87.59 per US dollar on Thursday, weighed down by U.S. tariff concerns, persistent outflows from local equities, and a strong dollar index.Earlier through the trading day, the rupee touched its weakest level at 87.74/$1. It pared losses later to close slightly stronger, likely due to central bank intervention, traders said.The rupee had closed at 87.42/$1 Wednesday, LSEG data showed.The local unit weakened after the Oval Office said it would impose a 25% baseline tariff on imports from India, alongside an unspecified penalty, starting August 1. That compares with an earlier announced baseline tariff of 10%."Importers started to hedge as soon as the rupee crossed 86.90/$1 previously. I think the central bank will intervene and will not let the rupee cross record low levels," said Anindya Banerjee, head of FX research, Kotak Securities.The weakness seen in the past two days has caused importers to frontload their near-term hedging, dealers said. Market participants expect the RBI to defend record low levels, as a breach there would trigger multiple stop losses.The Reserve Bank of India (RBI) intervened at multiple levels today, but constant dollar demand from oil companies and local institutions added consistent pressure.'The rupee was saved to some extent by the RBI, who sold dollars first at 87.75/$1 levels and then at 87.65/$1 levels to bring it down to 87.50/$1. From here constant dollar buying ensured that the close was at the lowest,' said Anil Bhansali, head of treasury at Finrex Treasury Advisors.The dollar index strengthened to 99.8 levels from 97.6 seen at the start of the week. Meanwhile, Asian currencies fell on Thursday, due to weak Chinese economic data and the approaching August 1 U.S. tariff deadline, LSEG data showed.Currency risk management advisor KN Dey said lack of clarity on penalty has created panic among market importers.'In a storm like this, exporters should try to avoid entering the market and wait for some clarity on tariff to emerge while importers should hedge their short to medium term position,' he said.
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