The Indian rupee slid to a historic low of 84.73 against the US dollar on Monday, marking a 0.2% decline in its worst single-day drop since June 4. The currency reached an intraday low of 84.73 before settling at 84.70, 14 paise weaker than Friday’s close. Strong dollar demand in the non-deliverable forward (NDF) markets, spurred by weaker-than-expected Q2 growth figures, contributed to the rupee’s decline. However, intervention by the Reserve Bank of India (RBI) helped to stem further losses.
Global factors have exacerbated the rupee’s struggles. The dollar’s strength has been bolstered by geopolitical developments, including US President-elect Donald Trump’s recent warnings to BRICS nations against pursuing an alternative to the dollar and his threats of imposing 100% tariffs. Market uncertainty has intensified amid concerns over potential Chinese retaliation through yuan devaluation. Analysts expect continued foreign institutional investor (FII) outflows in light of these challenges.
“It is no longer just macroeconomic factors that are determining the value of the rupee… it is more about geopolitics and the new US administration’s stance on trade,” said Ashhish Vaidya, head of treasury at DBS Bank. “Trump’s warning to BRICS about imposing 100% tariffs if an alternative arrangement to the dollar is pursued may have an impact on the rupee.”
Traders anticipate the rupee will trade within a range of 84.50 to 84.95 in the near term, with risks heightened by a recovery in crude oil prices. Despite this, positive trends in domestic markets could offer some relief.
“It is difficult to forecast a specific level for the rupee. It is not far from 85. The real question is how far it could go,” Vaidya remarked. “The double whammy for India would be a stronger dollar coupled with reduced government spending in the US, which could pressure most other currencies. Once the new administration in the US is in place and announces its policies, it will give the market a clearer sense of direction.”
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