The Indian rupee slipped to its weakest level in a fortnight on Thursday, pressured by clustered dollar demand at the daily reference rate alongside likely outflows linked to overseas debt repayments.
Mild interventions by the Reserve Bank of India, though, helped contain the currency's losses, traders said. The rupee was last at 95.3675 per dollar, down 0.15% from its close at 95.22 in the previous session.
Though the rupee had climbed to an over one-month peak of 94.32 earlier in the month on the back of a spate of regulatory measures and chunky inflows related to a large domestic IPO, its gains have since started to fade.
"Buying is quite sticky and it doesn't seem that will change soon," a trader at a foreign bank said, pointing to heightened dollar appetite from clients across diverse sectors like electronics manufacturers and jewellers.
In the non-deliverable forward market as well, inclination to "sell the dollar-rupee pair is quite weak and it's only intervention that pushes the pair down," a trader at a Singapore-based hedge fund said.
The persistent bearish bias on the rupee has left it reliant on frequent interventions by the Reserve Bank of India to prevent sharp moves while also making it somewhat disjointed from global cues.
On Thursday, for instance, the Federal Reserve's decision to leave policy rates unchanged helped lift most Asian currencies but did not lift the rupee.
"Spot stability driven by intervention and regulatory constraints is not necessarily equivalent to an improvement in underlying currency confidence," analysts at Emkay Global said in a note.
"The durability of INR's recovery will ultimately depend on whether market participants revise their medium-term expectations, rather than merely adjust their trading and hedging strategies."
Elsewhere, markets are awaiting the European Central Bank's monetary policy decision later in the day. The ECB is widely expected to keep its deposit rate steady while signalling that another increase, potentially as soon as December, remains likely.
