The rupee falls on demand for the dollar at the RBI reference rate, Asian weakness

The Indian rupee fell on Monday, following Asian peers, under pressure from demand for dollars around the Reserve Bank of India’s benchmark interest rate.The rupee ended at 90.2775 per dollar on Friday, down from 90.1975. The currency traded in a narrow range of 10 paisa and witnessed its fourth consecutive decline. Dollar and rupee forward premiums moved higher after hitting a low on Friday.

The RBI reference rate is the daily benchmark used to settle contracts that often attract concentrated buying or selling of dollars.The rupee’s pullback reflects underlying demand for the dollar after the RBI intervention that triggered a recovery in the currency last week, traders said.

Traders said routine purchases of corporate dollars and a lack of offers from exporters kept the currency on the defensive. Weakness in regional peers such as the Malaysian ringgit and the Philippine peso contributed to the drag.

Asian shares rose with AI-related themes in focus at the start of the first full trading week of the year, while oil prices fell as US military action in Venezuela was unlikely to disrupt a well-supplied energy market.

In India, broader investor sentiment remains cautious amid trade-related uncertainty, including concerns over the lack of a US-India trade deal and tariff rhetoric related to India’s Russian oil purchases. US President Donald Trump has warned of higher tariffs on India over Russian oil purchases. The US last year doubled tariffs on Indian goods to 50% as punishment for heavy purchases of Russian oil.

ICICI Securities Primary Dealership believes that the central bank may once again be quite tolerant of a strong rupee rebound, if one occurs, to hurt any speculative short positions.

But she sees a risk that the rupee will remain weaker for some time until a US trade deal is signed and foreign flows resume.