As the greenback remained strong, the rupee declined and ended Monday at a new record low. The pressure on the rupee is expected to persist until the markets gain clarification on the policies that the Trump administration will implement, as the dollar index remains close to its four-month high of 105.05 and US Treasury yields continue to rise.
The rupee dropped to Rs 84.40 during the day and ended at 84.3875, down from 84.3750 on Friday. According to market participants, if the dollar index rises to 106–107, it might reach the 85-mark. Traders expected the currency to drop to 84.60 at the beginning of Monday’s trading session. However, the RBI’s probable intervention on both the purchasing and selling sides restrained any significant drop.
A declining value of the yuan will make Chinese goods more affordable, which could encourage additional imports and increase India’s largest trade deficit with any nation. Even while it uses its large reserves to contain the decline, the RBI is prepared to absorb the impact by permitting a weaker rupee.
Forecasts for the rupee have already begun to be revised by analysts. HDFC Bank predicts that the currency will surpass 85 to the dollar in 12 months, while IDFC First Bank believes it will reach 84.50 far ahead of its March forecast.
Since the central bank has enough foreign exchange reserves to cushion the decline, most traders anticipate that the domestic currency will trade between 83.80 and 84.50 over the medium term. Notably, the RBI reported on Friday that the nation’s foreign exchange reserves fell by $2.675 billion to $682.12 billion for the week ending November 1. The most recent statistics indicate that the Forex kitty is currently at a two-month low.
The rupee has also been impacted by ongoing foreign withdrawals from the equities markets. After withdrawing $11 billion from Indian stocks in October, foreign investors have already taken out a net $2.5 billion in November.
