MUMBAI (Reuters) -The Indian rupee dropped to a record low against the U.S. dollar on Friday, which alongside the outage of the interbank order matching system, prompted the central bank to step in.
The rupee dropped to a record low of 83.42 to the dollar and was last at 83.3925. The rupee had been in a narrow range for more than a month, with the Reserve Bank of India (RBI) not allowing it to weaken past 83.30, according to traders.
“On why the RBI today decided that (allow rupee to drop below 83.30), it’s impossible to say,” a forex trader at a bank said.
“What is important is what happens over the next few days – whether 83.30 will now be the new bottom (for USD/INR) and how the RBI will mange the currency from here on out. Next week will be very important to see if a new range has been made.”
Alok Sharma, associate vice president of treasury at ICBC, said that trading activity in the rupee will be low on Monday due to the Diwali holiday and he will eye moves Wednesday onwards.
The pressure on the rupee was exacerbated due to an outage of the interbank order matching system, likely leading to the RBI stepping in to calm the market, traders said.
The central bank is unlikely to allow an unchecked slide in the rupee, according to some analysts.
The RBI will defend the currency “in a systematic way” like it has in recent months, said Arnob Biswas, head of foreign exchange research at SMC Global Securities. He, however, said that the range in the USD/INR has now shifted higher.
(Reporting by Nimesh Vora; Editing by Sonia Cheema)