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INR: Rupee Hits Fresh Low on Month-End USD Demand, RBI Intervenes

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Month-end USD demand by importers and ongoing concerns over India’s widening trade deficit has pressured the rupee to a fresh record low, with USD/INR’s rise of as much as ~0.5% earlier on in the session its steepest since February 2023. Note that gains have since moderated to around 0.2%. Rallying spot has been accompanied by a sharp rise in implied vols, with 1-month vols nearing 4% and currently at its highest levels since August 2023.

  • According to Reuters, the rupee was hurt today by “persistently strong dollar demand” in the NDF market while likely intervention by the RBI capped the currency's losses. Reuters also note that a widening trade deficit and concerns about slowing growth have provided a bearish bias to the INR.
  • RBI Governor Sanjay Malhotra who took office this month succeeded a regime that was largely characterised by its commitment to curb volatility in the rupee. While Malhotra has not yet openly commented on the rupee, other officials have previously said the RBI does not target a specific level.
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Month-end USD demand by importers and ongoing concerns over India’s widening trade deficit has pressured the rupee to a fresh record low, with USD/INR’s rise of as much as ~0.5% earlier on in the session its steepest since February 2023. Note that gains have since moderated to around 0.2%. Rallying spot has been accompanied by a sharp rise in implied vols, with 1-month vols nearing 4% and currently at its highest levels since August 2023.

  • According to Reuters, the rupee was hurt today by “persistently strong dollar demand” in the NDF market while likely intervention by the RBI capped the currency's losses. Reuters also note that a widening trade deficit and concerns about slowing growth have provided a bearish bias to the INR.
  • RBI Governor Sanjay Malhotra who took office this month succeeded a regime that was largely characterised by its commitment to curb volatility in the rupee. While Malhotra has not yet openly commented on the rupee, other officials have previously said the RBI does not target a specific level.