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The rupee hit its fresh all-time low of 84.30 to a dollar on Thursday, amid FPI outflows and expectations that Donald Trump’s win in the US presidential elections is likely to boost the American currency in the coming months.
The Indian currency had recorded its previous all-time low of 84.28 on Wednesday.
Continuing its downside trajectory, the rupee hit its fresh all-time low of 84.30 to a dollar on Thursday, amid FPI outflows and expectations that Donald Trump’s win in the US presidential elections is likely to boost the American currency in the coming months. The Indian currency had recorded its previous all-time low of 84.28 on Wednesday.
According to analysts, Trump’s policies of tax cuts and deregulation are likely to lift US growth, prompting investors to prefer the dollar to the other currencies. They also add that the threat of tariffs is likely to undermine euro and Asian currencies.
However, the dollar index dropped 0.1 per cent to 104.9. The index, which gauges the American currency’s strength against a basket of six currencies, had risen to its 4-month high of 105.12 on Wednesday.
“The Indian rupee has fallen to its lowest at 84.30 and is expected to continue with its fall as FPIs continue selloff in equities,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
On Wednesday, foreign portfolio investors (FPIs) sold Rs 4,445.6 crore worth of equities in the Indian market, putting pressure on the rupee. Foreign investors have so far sold a total of Rs 1.35 lakh crore Indian equities in the past one month.
Rupee Fall: Will It Continue?
The RBI is “slowly letting it (USD/INR) move higher but the upside should be limited near 84.40 in the near term,” a trader at a state-run bank said, according to Reuters.
Traders expect the Reserve Bank of India to continue intervening to prevent sharp moves in the rupee, which is evident in the currency’s muted implied volatility compared to its regional peers.
According to a note by Citibank, the RBI intervention and India’s inflation differential with the rest of the world will determine the potential for further rupee depreciation.
Investors now await the US Federal Reserve’s policy decision due post-midnight IST.
“The Fed is expected to cut interest rates tonight by 25 bps and markets will look into the fact whether a cut next month is a possibility or not as US yields have increased considerably,” Bhansali added.
Rupee At All-Time Low: How Does It Impact You?
A fall in rupee makes imports expensive, thus raising prices in India. A costlier crude oil, which India majorly imports to meet its demand, might lead to the hike in the prices of most items in the economy.
“However, export-oriented sectors like IT and pharma might gain from a weaker rupee as their dollar realisation increases in India. A weaker rupee also makes Indian exports-oriented items more competitive in the global markets,” said an analyst.
