Rupee Drops to All-Time Low Amid Dollar Demand and Weak Equities

On December 18, the Indian rupee dropped to an all-time low of 84.9550 against the U.S. dollar before closing at 84.9525, down 0.07%. The decline was driven by strong dollar demand from importers, expected outflows from local equities, and speculative dollar bids.

Weak Regional Currencies Add Pressure

The rupee’s fall mirrored the broader weakness in regional currencies ahead of the U.S. Federal Reserve’s policy decision. Benchmark Indian equity indices BSE Sensex and Nifty 50 also fell by about 0.6%, adding to the rupee’s struggles.

RBI Interventions Cushion the Impact

Despite the decline, the Reserve Bank of India (RBI) helped curb losses by selling dollars and conducting dollar-rupee buy/sell swaps. These measures aim to limit the impact of spot dollar sales on foreign exchange reserves and liquidity.

Rupee Fares Better Than Peers

Since November, the rupee has fared better than other regional currencies, which have weakened between 1.8% and 4.4%, compared to the rupee’s 0.9% drop.

Global Factors in Play

Investors globally are focused on the Federal Reserve’s final policy meeting of 2024, with expectations of a 25-basis-point rate cut. This move could signal fewer cuts in 2025 and beyond, further influencing global markets.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.