MUMBAI, March 22 (Reuters) – The Indian rupee fell to a record low against the U.S. dollar on Friday, pressured by a drop in the offshore Chinese yuan and strong local dollar demand close to the end of the session, traders said.
The rupee ended at 83.4250 against the dollar – its lowest closing level on record – down 0.3% from its close at 83.1475 on Thursday.
The rupee hit an all-time low of 83.43 near the end of the session and fell 0.7% this week, the steepest decline in seven months.
While the weakness in the yuan was pressuring the rupee since the start of the session, aggressive dollar buying in the final few minutes drove it past previous lows, the head of treasury at a mid-sized private bank said.
A lack of substantial dollar inflows and a rise in the dollar index also hurt the rupee, traders said.
The dollar index was up 0.4% at 104.39 after hitting a month’s high earlier in the session.
An “artificial dollar scarcity” in the market, reflected in the depressed overnight dollar-rupee swap rate, also contributed to the rupee’s losses, a trader at a foreign bank said.
While the Reserve Bank of India had likely sold dollars earlier in the session near 83.38-83.39 levels, it appeared the central bank was absent towards the end of the session, traders said.
The closing days of March are likely to be “critical” for the rupee after Friday’s price action, Abhilash Koikkara, head of foreign exchange and rates at Nuvama Professional Clients Group, said.
If the rupee continues to hover near record lows over the next few days, the bias on the unit is likely to turn negative, Koikkara said.
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Reporting by Jaspreet Kalra; Editing by Eileen Soreng and Mrigank Dhaniwala
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