Rupee records sixth weekly drop, ends at 82.67 against dollar

After crossing the 83-mark, the Indian rupee edged higher against the US dollar as the equities market stayed firm and treasury yields recorded a sustained surge. Further, RBI's intervention to limit the rupee's weakening from its record low of 83.29 against the US dollar also supported the performance. In the past six weeks, the domestic currency dropped by around 4% against the greenback.

On Friday, the rupee closed at 82.6750 per dollar against the previous day's 82.7600.

According to a Reuters report, the intervention was on a forward basis and not on a spot basis as has been the case recently, according to traders. The RBI sold dollars in spot and did buy/sell swaps mostly for December delivery.

Further, the report explained that the buy/sell swap alongside soaring Treasury yields and stop losses on paid positions caused rupee forward premiums to extend their recent downside.

Notably, the 1-year USD/INR implied yields plunged below 2.5% levels -- lower by 30 basis points on-week. During the previous week, the 1-year yields declined 40 basis points.

Reuters added that market participants reckon RBI's preference to sell dollars for delivery at a future date rather than on a spot basis may be fuelled by the need to manage rupee liquidity and avoid a decline in headline foreign exchange reserves.

Mitul Shah, Head of Research at Reliance Securities said, "While the Rupee breached the 83 mark against the USD earlier this week for the first time in its history, so far this year, the rupee has depreciated ~11%. The Indian currency has performed much better than many other emerging market currencies."

Earlier today, in its technical outlook report, ICICI Direct said, "US dollar/INR pair has approached key trend line resistance around 83.30 mark. Since 2015, on multiple occasions, the pair has reversed lower from this trend line amid extreme overbought readings on a weekly timeframe. Stability in the rupee against the US dollar would support Indian equities in coming weeks."

Sensex closed at 59,307.15 higher by 104.25 points or 0.18%. Nifty 50 climbed marginally by 12.35 points or 0.07% to end at 17,576.30.

After the rupee crossed 83-mark, Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth said, "We see USD INR to range between 83 & 84 between now and December end."