Rupee hits record low, worst drop in 7 months as dollar surges

The Indian rupee dropped to a record low on Friday, driven by increased dollar demand from maturing non-deliverable forwards and currency futures, according to Reuters. The sharp decline also triggered panic dollar buying by importers.

The rupee slid to an all-time low of 85.8075 against the U.S. dollar before central bank intervention helped moderate the losses, traders reported.

By the end of the day, the currency settled at 85.5325, down 0.3 per cent, marking its steepest single-day drop since June 4, when unexpected general election results rattled markets. This week’s decline extends the rupee's losing streak to eight consecutive weeks, with a 0.3 per cent loss for the week.

Concerns over India's slowing growth and widening trade deficit have weighed on the rupee, compounded by the dollar's strength amid the Federal Reserve's hawkish policy stance and anticipation of U.S. President-elect Donald Trump's policies. The rupee has set record lows for eight consecutive sessions.

The central bank's absence earlier in the session in the face of strong dollar bids drove the rupee down sharply, traders said, prompting panic dollar buying from importers.

However, the Reserve Bank of India (RBI) "stepped in strongly" towards the close of session, which helped the rupee recover, a trader at a private bank said.

The RBI "seems to be keen to let the rupee adjust and let the overvaluation correct against peers", Abhishek Goenka, chief executive at FX advisory firm IFA Global told Reuters.