Indian Rupee Recovers After Hitting Record Low Against U.S. Dollar

The Indian rupee recovered after falling to a fresh low against U.S. dollar.

The local currency dipped 0.06%, or 5 paise, at the open, to 83.03.

During the day, it fell as much as 0.36% to 83.29--a record low for the rupee. However at around 12:30 p.m., it reversed losses and gained as much as 0.33% to 82.71.

It closed at 0.28% higher at 82.76.

The currency hit the 83-mark for the first time on Wednesday, as the dollar continued to strengthen.

"The dollar index rose to 113 levels, the U.S. 10-year yield to 4.15% and crude oil to $92.25 levels. The rupee to range between 82.8 to 83.5. Yesterday, rupee's weakness was caused by probable dollar buying at 82.02 by RBI in currency futures and outflows of large size of $500 million from Gail and MRPL. RBI did not protect 82.4 and short covering of the pair took it to 83 with stop losses trigerring between 82.4 to 83.5," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

"Global cues were USD positive as risk off sentiments, strong dollar index, weak Asian currencies and surging U.S. bond yields, all coupled to push USDINR higher. Over the near term, we expect USDINR to trade with a positive bias, within a range of 82.7 and 83.5 levels," said Anindya Banerjee, vice president of currency derivatives and interest rate derivatives at Kotak Securities.

Kaustubh Chaubal, senior vice president of the corporate finance group at Moody's Investors Service, said that the negative credit implications of the Indian rupee’s depreciation will be limited for Moody’s-rated companies in India.

"Nearly half of 23 rated companies have natural hedges against rupee weakness, while another four have global operations that enable them to match foreign-currency debt service with foreign-currency cash flows, often at the subsidiary level."

The remaining, he said, use financial hedges to manage their exposure to U.S. dollar debt costs, have low exposure to rising U.S. dollar debt costs, or have a combination of these factors to help limit the strain on cash flow and leverage.