The currency opened a tad weaker and rapidly declined to 91.0525, its lowest level in a month, and drifted closer to its all-time low of 91.0750 set in mid-December.
It ended at 90.9750 to a dollar, down 0.1% from 90.91 at Monday’s close. The unit has lost around 1% in five sessions.
Traders said that state-run banks likely sold dollars near the 91/rupee level, likely on behalf of the Reserve Bank of India, which pulled back the currency from near record lows.
Bankers said that the RBI also mildly intervened on Friday and Monday, and it appeared that the central bank did not want the rupee to breach its record low, at least on Tuesday.
“Despite genuine outflow pressure, the RBI held fort forcing dollar longs to pull back their bets,” a trader with a state-run bank said.
Meanwhile, growing tension between the U.S. and European Union is likely to keep the rupee under pressure, according to traders, after U.S. President Donald Trump threatened to rekindle a trade war with Europe over the future of Greenland.”Continued global uncertainties, including U.S. pressure on Greenland, have led to a risk-off sentiment. This, along with strong offshore hedging in USD/INR, has led to a test of 91 levels,” said Sameer Karyatt, executive director and head of trading at DBS Bank India.
He added that the rupee is expected to remain under depreciating pressure.
Bankers expect the RBI to defend the record low unless a new wave of global factors flares up.
