The rupee had risen to a peak of 87.6250 earlier this month following a central bank crackdown, but has since lost those gains and is once again hovering close to the record low of 88.80 reached in late September.
The currency ended Friday’s session slightly lower at 88.7650, little changed month-on-month.
India’s stock indexes, the BSE Sensex and Nifty 50, were both down 0.4%, tracking weakness among Asian peers, but are expected to be up more than 4.5% at the end of October – their best monthly gain since March.
While traders expect the Reserve Bank of India to continue to keep rupee volatility in check, the broad trend is towards depreciation in the absence of clear progress on a US-India trade deal.
A pact between New Delhi and Washington is “very close,” a senior government official said last week. Elsewhere, signs of cooling US-China trade tensions helped support Asian currencies this week, even as an hawkish side note in US Federal Reserve commentary boosted the dollar and US bond yields. “Measures of FX volatility fell to a new year-to-date low this week, highlighting that current market conditions remain supportive for FX carry trades,” MUFG said in a note.
Carry trades involve borrowing currencies with low interest rates to buy currencies with better returns.
The dollar index last stood at 99.54 and was on track to end the month 1.8% higher, while Asian currencies were mostly stronger. The rupee fell 1% this week.
Traders will keep a close eye on portfolio flows related to IPOs next week, which could help the rupee find modest relief.
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