The Indian rupee concluded Thursday at a historically low point against the US dollar, driven by increasing possibilities of an extended phase of elevated US interest rates and growing concerns about the Chinese economy. These factors prompted global investors to reduce their exposure to currencies of emerging markets.
At the end of Thursday’s trading, the rupee stood at 83.15 per US dollar, a decrease from the previous closing rate of 82.95 per dollar. This new closing record surpasses the previous milestone set on October 19, 2022, when the Indian currency closed at 83.02 per dollar. Notably, the rupee had also reached its all-time intraday low of 83.29 per dollar on October 20, 2022.
Throughout this calendar year, the Indian rupee has experienced a depreciation of 0.5% against the US dollar. Despite interventions by the Reserve Bank of India (RBI) through dollar sales to mitigate volatility in the exchange rate, experts believe that the central bank’s ability to intervene might be limited due to the dominant impact of global factors driving the rupee’s devaluation. Hindiwix
Abheek Barua, Chief Economist at HDFC Bank, highlighted the prevalent risk aversion in the market, attributing much of it to ongoing disappointments related to China’s economic performance. He also pointed out that recent statements from members of the Federal Open Market Committee (FOMC) and minutes from previous meetings have further exacerbated the situation.
Barua forecasts a trading range of 82.50 to 83.25 rupees per US dollar in the coming weeks. Despite expectations of RBI intervention, he emphasized that attempting to counter the prevailing market trend amid turmoil across emerging markets might not be a prudent strategy.
Anindya Banerjee, VP for Currency Derivatives at Kotak Securities, estimated that the RBI may have engaged in selling US dollars worth about $2 billion in the spot market on Thursday.
The volatile performance of the Chinese yuan, which traditionally exerts influence on other Asian currencies, has added to the existing uncertainty. Recent reports regarding missed interest payments on bonds by Country Garden, one of China’s major property developers, have contributed to fluctuations in the yuan and its subsequent effects in the region.