By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee hovered just shy of its all-time low on Tuesday, mirroring recent trading patterns, as dollar sales by state-run banks helped cap losses despite multiple headwinds.
Ongoing trade frictions with the U.S. and the sharp rally in gold prices weighed on the rupee, alongside a broader trend of portfolio outflows and a ramp up in importer dollar demand.
The local currency was last at 88.7750 against the dollar, down 0.1% on the day and in striking distance of its all-time low of 88.80 hit on September 30.
Frequent interventions by the Reserve Bank of India have helped limit the rupee’s weakness near 88.80, traders said.
While news of India’s trade delegation visiting the U.S. this week had offered some relief on Monday, traders reckon that a trend reversal is unlikely in the face of concrete breakthroughs in negotiations.
“The rupee’s cautious appreciation and technical positioning near key levels like 88.80 and 88.50 suggest a finely balanced market. RBI moves and global trade developments will be crucial in USD/INR direction,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
Meanwhile, India’s benchmark equity indexes, the BSE Sensex and Nifty 50, fell about 0.1% each and gold extended its searing rally to an all-time high of more than $4,100 per ounce. The yellow metal has gained 58% year-to-date.
According to analysts, the INR is among the most vulnerable currencies to rising gold prices.
On the day, foreign banks were spotted bidding for dollars while state-run lenders were present on offer intermittently, a trader at a Mumbai-based bank said.
Elsewhere, the dollar index fell 0.2% to 99.1, while most Asian currencies slipped.
With the U.S. economic data delayed due to a government shutdown, investors are keeping their focus on how the ongoing U.S.-China trade tensions evolve and whether the threat of steep 100% levies materialises.
(Reporting by Jaspreet Kalra; Editing by Sumana Nandy)
