In a concerning development, the Indian rupees reached a fresh closing low of 83.29 against the US dollar, driven by the ascent of the dollar index. The backdrop for this slide included heightened geopolitical tensions in West Asia and surging crude oil prices, leading to foreign investors pulling out of the Indian market, further burdening the local currency.
This dip marked a significant low, as the rupee hadn’t seen such a level since October 16 when it settled at 83.28. Just a day before this latest record, it had closed at 83.26, highlighting the escalating pressure on the currency.
The dollar index, which gauges the strength of the US dollar against a basket of major global currencies, climbed to 106.87 from 106.02, exacerbating the rupee’s decline.
Market experts speculated that the Reserve Bank of India (RBI) stepped in to safeguard the rupee from further weakening. Anindya Banerjee from Kotak Securities suggested that the RBI might have sold around $50 million to support the rupee’s value.
The rupee has experienced a 0.3% depreciation in October, following a 1.2% decline between July and September. In the current financial year, it has slipped by 1.33%, with a 0.66% depreciation in the current calendar year.
Concerns loom over the rupee’s trajectory, with market participants eyeing the 83.60-to-a-dollar mark as the next potential threshold if the rupee falls below 83.30.
The RBI faces a challenging predicament as it intervenes in the market to shield the rupee, while its foreign exchange reserves have dwindled to $583.53 billion by October 20. The rupee’s woes stem from outflows due to various factors, including foreign portfolio investors, oil companies, importers, and ECB redemptions.
This turbulent financial landscape underscores the complexity of managing currency values amidst global economic shifts and geopolitical uncertainties. The RBI continues to tread carefully to stabilize the rupee and safeguard the nation’s economic interests.
