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INR: Rupee Slips to Fresh Record Low, Prompting RBI Intervention

INR
IndiaEM BulletBulletAPACEmerging Market News

The rupee has slipped to a fresh low versus the dollar, with ongoing weakness evidence of the RBI’s more hands-off approach to FX management under new Governor Sanjay Malhotra. Similarly, 1-month realised INR vols have neared on 4% - its highest level since April 2023.

  • Nevertheless, the RBI still intervened overnight to prevent further weakness. According to traders who spoke to Reuters, state-run banks were spotted offering dollars near 87.24-87.26 levels, most likely on behalf of the central bank.
  • Expectations that the RBI will cut rates at its first policy meeting of the year on Friday have largely underpinned rupee weakness this week, alongside familiar headwinds such as dollar demand from local importers, despite broader dollar weakness during the APAC session.
  • The central bank’s recent $18bln of liquidity injection measures have been seen as a precursor for a 25bp cut to rates – which is the outcome expected by 33 of the 39 analysts surveyed by Bloomberg (1 analyst expects a 50bp cut, 5 see rates unchanged). Our full preview for the decision will be out later in the week.
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The rupee has slipped to a fresh low versus the dollar, with ongoing weakness evidence of the RBI’s more hands-off approach to FX management under new Governor Sanjay Malhotra. Similarly, 1-month realised INR vols have neared on 4% - its highest level since April 2023.

  • Nevertheless, the RBI still intervened overnight to prevent further weakness. According to traders who spoke to Reuters, state-run banks were spotted offering dollars near 87.24-87.26 levels, most likely on behalf of the central bank.
  • Expectations that the RBI will cut rates at its first policy meeting of the year on Friday have largely underpinned rupee weakness this week, alongside familiar headwinds such as dollar demand from local importers, despite broader dollar weakness during the APAC session.
  • The central bank’s recent $18bln of liquidity injection measures have been seen as a precursor for a 25bp cut to rates – which is the outcome expected by 33 of the 39 analysts surveyed by Bloomberg (1 analyst expects a 50bp cut, 5 see rates unchanged). Our full preview for the decision will be out later in the week.