Saturday
21st Dec 2024
Dhivehi Edition
The Indian Rupee logo seen inside the Reserve Bank of India (RBI) headquarters in Mumbai, Photo: REUTERS
The Indian rupee reached an all-time low of 85.10 against the U.S. dollar on Friday, surpassing its previous record of 85.0850 set the day before. Persistent dollar strength, driven by robust U.S. economic data and a hawkish Federal Reserve outlook, exerted downward pressure on the local currency.
By 10:00 a.m. IST, the rupee was trading at 85.0975, with traders attributing reduced volatility to likely interventions by the Reserve Bank of India (RBI) via state-run banks offering dollars in the market.
Several factors have contributed to the rupee's recent struggles, including slowing economic growth, which hit a seven-quarter low, a widening merchandise trade deficit, and outflows from domestic equity markets. On Thursday, foreign investors offloaded nearly $500 million worth of Indian equities, adding to the rupee’s woes.
Kunal Sodhani, Vice President at Shinhan Bank India, highlighted that the rupee faces challenges from a higher trade deficit and sluggish growth figures, stating, "Positionally, 84.70 now acts as a good base for USD/INR, while the door remains open for 85.50 levels."
The dollar index hovered near a two-year high of 108.4, buoyed by U.S. GDP growth surpassing expectations for the July-October quarter and lower-than-expected weekly jobless claims. This strength was reinforced by the Federal Reserve’s signal of fewer rate cuts in 2025 amid persistent inflationary pressures.
Despite the challenging macroeconomic environment, the RBI’s routine interventions have limited the rupee’s volatility compared to other Asian currencies.
Market participants now await the U.S. core personal consumption expenditure (PCE) inflation data, the Federal Reserve’s preferred inflation measure, due later on Friday. Economists polled by Reuters anticipate a month-on-month increase of 0.3% in November, up from 0.2% in October.