Rupee Slips 9 Paise as Dollar Demand Keeps Up Pressure

The rupee weakened 9 paise against the dollar on Monday, closing at 85.91 per dollar, as dollar demand from importers and banks kept the currency under pressure. Traders said the Reserve Bank of India likely intervened through state-run banks to prevent a sharper decline, selling dollars in the spot market.

The move came after the rupee had held near 85.80 for most of the previous session. A trader at a private bank said the dollar demand was broad-based, covering oil importers and corporate payments. The RBI's intervention, through sell-buy swaps in the spot market, absorbed rupee liquidity without draining foreign-currency reserves, two traders said.

The dollar index held near 104.5, supported by expectations that the Federal Reserve will keep rates higher for longer. That backdrop, combined with month-end dollar demand from importers, kept the rupee on the back foot. The local currency has lost roughly 2% against the dollar this year.

For HDFC Bank, which has a large foreign-currency book, a weaker rupee can widen the gap between its dollar liabilities and rupee assets. Infosys and Wipro, which earn a significant portion of revenue in dollars, benefit from a weaker rupee when converting those earnings back into rupees. The rupee's slide this year has added roughly 3-4% to the rupee-denominated revenue of large IT exporters, analysts at a domestic brokerage said.

Traders said the RBI's intervention strategy has shifted from defending a specific level to managing the pace of depreciation. The central bank sold dollars through state-run banks at multiple points during the session, one trader said. The next trigger for the pair is the U.S. jobs report due Friday, which could set the tone for the dollar through early February.