The Indian rupee slumped to a record low against the U.S. dollar on Wednesday, reflecting a broader weakening of Asian currencies and growing concerns over the country’s economic outlook. The rupee touched an all-time low of 84.8650 before settling at 84.83, marking a marginal recovery by the close of trading.
The Indian rupee was pressured by Chinese yuan that slid 0.4 per cent to 7.28 after reports surfaced suggesting that China may allow further weakening of its currency next year to mitigate the impact of higher tariffs. This added to broader regional challenges, with the yuan’s decline contributing to a wave of depreciation across other Asian currencies.
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The rupee has weakened by 0.4 per cent in December, underperforming many of its regional counterparts. This has been fueled by concerns over slowing economic growth, as well as uncertainties surrounding the appointment of a new Reserve Bank of India (RBI) governor. These factors have stoked expectations of potential rate cuts in 2025, further pressuring the rupee.
Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities said,” “The rupee traded flat near 84.85, maintaining stability amid ongoing FII selling and geopolitical uncertainties. With limited directional movement, the rupee’s range is expected to stay between 84.70-85.00, as market participants await further cues from global and domestic developments.”
Despite these headwinds, the Indian central bank stepped in to limit further declines. The Reserve Bank of India (RBI) sold dollars through state-run banks to prop up the rupee, preventing more significant losses. The RBI’s intervention, though, was not enough to fully offset the broader downward trend, as the rupee continues to face headwinds from both domestic and global factors.
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Meanwhile, the U.S. dollar remained supported by expectations of future Federal Reserve actions. The dollar index rose by 0.2 per cent to 106.5 as markets braced for the release of U.S. inflation data later on Wednesday.
In addition to the rupee’s fall, dollar-rupee forward premiums also rose, reflecting heightened demand in the non-deliverable forwards (NDF) market.
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