The rupee closed at 84.0375 to the U.S. dollar against its close at 84.06 in the previous session. The currency had slipped to an all-time low of 84.0750 on Monday.
Mild dollar sales from state-run banks alongside limited speculative appetite kept losses for the rupee at bay, traders said.
It is “quite likely that it (USD/INR) drifts up to 84.20 in the near-term but a rise above that could create some panic among importers so the Reserve Bank of India is unlikely to allow that”, a trader at a state-run bank said.
Asian currencies were down between 0.1% to 0.7% on the day while the dollar index was at 103.1, within touching distance of its two-month high hit on Monday.
Brent crude oil futures fell 5% to $73.5 per barrel on the back of a weaker demand outlook and after a report said Israel is willing not to strike Iranian oil targets, easing concerns about supply disruptions. “Declining oil prices suggest the scope for further USD gains today is tight … should we see more independent dollar outperformance, we could conclude that is due to some positioning ahead of the U.S. election in three weeks from now,” ING Bank said in a note. While falling oil prices are a comfort for the rupee, portfolio investment flows are likely to be a more important driver for the currency in the near term.
Foreign investors have pulled out about $8 billion from local stocks this month, a sharp reversal from inflows of about $11.1 billion in September.
Benchmark Indian equity indices, the BSE Sensex and Nifty 50, ended the day lower. They have slipped nearly 3% so far in October.
