The dollar has gone from strength to strength as US President-elect Donald Trump emerged victorious. This along with the Fed rate cuts has helped rhe dollar rally. However, the rupee as a result slipped to all-time lows. The continuous FII selling also dented sentiment.
Dollar on a dream-run
The US Dollar Index (DX100) also touched its one-year high of 106.575 on November 15, 2024. The DX 100 performed 3.17 per cent with an upward trend in one month and 4.23 per cent in the last three months. Recently Fed Chair Jerome Powell commented there was no need to rush rate cuts with the economy still growing, the job market solid and inflation still above the 2% target, tempering expectations for a rate cut next month.
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Rupee under pressure
The rupee hit record low of 84.40 against the U.S. dollar as the greenback garnered support on expectations of the U.S. government spending more money and possibly raising tariffs going forward . If we track the rupee’s yearly performance, it has weakened almost 1.5 percent from 83.21 to 84.48.
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Retail inflation in October touched 6.2 per cent, making it unlikely for RBI to ease rates any time soon. The Central Bank has to maintain the tricky balance between maintaining growth, reining in inflation and ensuring economic expansion.
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Commenting on the ruppe’s performance, Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said “The rupee traded weaker by another 0.10 rupees, closing at 84.48 as pressure from rising U.S. dollar rates continued to weigh on other currencies, contributing to the rupee’s underperformance. The higher-than-expected U.S. CPI data, which came in at 2.6% compared to the previous reading of 2.4%, fueled further strength in the dollar.”
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