The rupee closed at a new all-time low of Rs 84.114 against the dollar on Monday amid continuous foreign outflows from the equity markets due to jitters amid institutional players ahead of the result of the US presidential election and the US Federal Reserve’s monetary policy meeting on November 6-7, forex traders said.
The domestic currency had hit its previous all-time low at 84.10/$ on Thursday. The forex market was closed on Friday on account of Diwali.
Foreign portfolio investor (FPI) outflows from the equity markets were the highest in October, driven by worsening geopolitical conditions and cheaper valuations in the Chinese market. Foreign investors offloaded Rs 94,017 crore in October.
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“Everything is dependent on who wins. US elections will decide the trajectory, then there is the FOMC meeting this week, where chances of 50 basis points have weakened over the days. There is certainly a caution in the market,” a dealer with a private bank said.
Foreign banks have been bidding for dollars, increasing demand for the greenback, said traders. However, the Reserve Bank of India’s active intervention in the currency market has kept a check on the rupee’s fall, said traders.
The US Fed is set to announce its interest rate decision on Thursday. With rising chances of Donald Trump, the Republican candidate for US President, winning the elections, chances of a 50-bps cut in the interest rate have become slim.
“The market is full of uncertainties. We have no idea in what direction global cues will move. Currently, the market is just waiting for election (US) results,” a dealer with a foreign bank said.
According to a Bank of Baroda report, “The rupee is expected to remain under pressure in coming weeks, trading within the range of 83.9-84.2/$ due to ongoing geopolitical risks, the outcome of the US presidential race and anticipated Fed policy updates.”
The report said should the Reserve Bank of India choose to deploy its considerable forex reserves ($685 billion), it could mitigate volatility in the currency market.
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According to data released by the RBI on Friday,
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