The rupee remains under pressure and could slip to a fresh all-time low, as persistent dollar demand and rising hedging needs reinforce a bearish outlook in the currency market.
After briefly stabilising on Thursday, the rupee is still trading uncomfortably close to its weakest-ever level, with traders warning that sentiment remains skewed towards further depreciation rather than recovery.
The one-month non-deliverable forward market indicates the rupee is likely to open largely flat from Thursday’s close of 91.63, not far from its lifetime low of 91.7425 touched earlier in the week.
Despite a modest rebound in the previous session, market participants said the price action highlighted the underlying stress on the currency.
• Heavy dollar buying dominated through most of the session
• The rupee held its ground mainly due to support from the Reserve Bank of India
• Gains were limited even as broader Asian currencies saw supportive cues
Traders said the inability of the rupee to stage a meaningful recovery, despite favourable regional signals, points to strong underlying demand for dollars.
• Bullion-related dollar demand linked to gold imports
• Continued equity outflows from domestic markets
• Offshore demand tied to speculative positions
According to traders, the RBI has been stepping in intermittently to smooth volatility rather than defend a specific level. For much of the week, the central bank has sold dollars in the spot market while also using buy-sell dollar-rupee swaps to offset the liquidity impact of its intervention.
“The market is trading with the mindset that any dip in dollar-rupee will not last,” a currency trader at a bank said. “That’s why dollar buying keeps coming back.”
Expectations of further rupee weakness have led to higher hedge ratios among importers and investors. At the same time, exporters have shown less willingness to sell dollars in the forward market, reducing natural dollar supply.
For now, traders say the rupee’s trajectory will continue to be shaped by global cues, capital flows and the RBI’s willingness to lean against sharp moves — with risks still tilted towards testing new lows.
