Expectation of dollar outflows due to Holcim Group’s sale of its India cement business is also said to have added to rupee’s rout.
The Reserve Bank of India likely intervened in the spot, forwards and futures markets, helping the local unit erase early losses against the greenback, dealers said. It sold an estimated $1 billion during the day, they said.
The rupee touched an all-time low of 77.80 per dollar during the day before ending at 77.57, up 0.26% from its previous close. The previous record low of 77.63 was hit on May 12.
The local currency market was shut Monday due to Buddha Purnima. However, the offshore derivative market was operational. A notional spot exchange rate in the non-deliverable forwards market touched as low as 77.93 Monday, show Bloomberg data.
“A combination of Holcim exit coupled with higher global crude oil prices resulted in the rupee’s losses to the dollar,” said Ashhish Vaidya, managing director at DBS Bank India. While rising crude impacts India’s macro fundamentals, there is psychological pressure on the rupee due to upcoming dollar-denominated payments from the Holcim deal although the terms are yet to be known, he said.
The Adani Group has agreed to acquire a controlling stake in Switzerland-based Holcim AG’s cement businesses in India in a $10.5 billion deal. Holcim’s share in the deal is $6.4 billion. Although payment timelines and modes are not yet known, a section of currency dealers are expecting a bout of outflow due to this.
“Global dollar strength combined with rising oil prices pulled the rupee to a new low,” said Parul Mittal Sinha, head of financial markets, India, at Standard Chartered Bank. “The rupee is likely to remain under pressure in the near term amid adverse global developments.”
Some state-owned banks were seen selling dollars in the spot market on behalf of the central bank and doing the buy/sell swap in the forwards market. This mechanism is aimed at protecting depletion of forex reserves, said three people familiar with the matter.
“The RBI seems to have sold (dollars) spot and cut long forward positions,” said Abhishek Goenka, founder and CEO at IFA Global, a forex advisory. “Ultimately, we may see no reflection in the reserves. Hence we have seen substantial fall in the forward premiums since Friday.”