In the midst of India’s robust economic growth, a disconcerting trend has emerged as the national currency, the rupee (INR), faces a continued decline against the US dollar (USD) in recent months.
Despite the nation’s thriving economy, a confluence of factors, including elevated US Treasury yields and ‘higher for longer’ interest rates, has contributed to the rupee’s depreciation against the greenback.
This concerning trajectory took a sharper turn on Friday, November 24, when the rupee hit a fresh record low against the greenback, closing at 83.37 — a 0.03% dip from the previous session’s close.
The currency’s struggle is evident in its narrow daily range and a 0.1% weekly fall, marking a challenging period for India’s monetary stability.
Poor session for Asian currencies
The rupee’s latest downsizing was in part driven by increased demand for the greenback from importers and a general weakness observed among Asian currencies.
South Korean won, Taiwanese dollar, and Thai Baht all saw noteworthy declines on the day.
According to one foreign exchange (Forex) trader, global banks were seen bidding for the US dollar on Friday, a move that was likely carried out on behalf of custodial clients.
As a result, the rupee has become “sticky in the 5-10 paisa zone near 83.30” the trader said.
Looking ahead, the INR is expected to remain rangebound, although small depreciations should not be ruled out, said HDFC Securities’ forex analyst Dilip Parmar.
On the other hand, Nuvama Alternative & Quantitative Research suggested that the rupee could receive support in the upcoming week from equity inflows of approximately $1.5 billion associated with the rebalancing of the MSCI index, set to take effect from November 30.
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