Central bank intervention cushions rupee as Fed rate-cut bets recede
The Indian rupee held above its record low on Friday, supported by a familiar pattern of the central bank's intervention, even as a pullback in hopes of interest rate cuts in the U.S. dented risk appetite and drove global stocks lower.
The rupee appeared on track to open near or below its all-time low of 88.80 per U.S. dollar before the local spot market opened, but managed to recover slightly, helped by a likely intervention by the Reserve Bank of India to last trade at 88.7325, as of 10:30 a.m. IST.
The central bank likely stepped into the spot and non-deliverable forwards market to support the rupee, which has been languishing near its all-time low for much of the week.
It "doesn't seem like the RBI will allow a fall below 88.80 in the near term as that level seems to be the last stop before a breach of 90", a trader at a large private bank said.
The local currency has declined about 3.5% this year so far, dragged by a hit from steep U.S. tariffs on Indian exports and persistent portfolio outflows.
Foreign investors have net sold nearly $1 billion of local stocks over November so far.
For Friday, India's benchmark equity indexes, the BSE Sensex and Nifty 50 fell about 0.3% each, tracking the more than 1% drop in MSCI's gauge of Asian shares, ex-Japan.
Hawkish comments from Federal Reserve officials doused hopes for a U.S. rate cut next month, driving the Nasdaq down more than 2% and pushing the 10-year U.S. Treasury yield above 4.10%.
"Current hawkish Fed rhetoric probably reflects unease to cut further amidst limited official data and the need for optionality in December. A somewhat weak set of labour market data would probably be sufficient to nudge the Fed into a hawkish cut at the next meeting," analysts at DBS said.
