Indian Rupee hits record low over Dollar rally, equity outflows
Indian Rupee hits record low over Dollar rally, equity outflows
12 Nov 2024
The Indian Rupee hit a historic low today, largely owing to the US Dollar's rally and expected outflows from domestic equities.
The INR fell to an all-time low of 84.4125 against USD before settling at 84.3925, the same as its closing number in the previous session.
This is the fifth straight session that the currency has hit record lows.
US election outcome boosts Dollar index
Dollar surge
The recent Donald Trump victory in the US presidential election has strengthened the Dollar index, which has risen by 1.8% this month alone.
On Tuesday, the Dollar index gained 0.3% to hit a peak of 105.87, its highest since July.
The rise came as most Asian currencies fell, adding more pressure on the INR.
Rupee outperforms regional peers despite challenges
Regional comparison
Despite the rising Dollar and outflows from domestic stocks, the INR has managed to outperform most of its regional counterparts in recent sessions.
The Yuan and Thai Baht have witnessed declines of 1.2% and 1.6% respectively this month, while the INR's depreciation has been restricted to 0.4%.
This resilience is credited to regular interventions by India's central bank.
RBI's intervention and state-run banks' role
Market response
State-run banks were seen selling Dollars today, probably on behalf of the Reserve Bank of India (RBI), traders said.
"As the dust settles after last week's US election results, global markets are settling into core trades of a firmer dollar, higher US equities and higher terminal rate from the Fed," ING Bank said in a note.
Overseas investors withdraw from Indian stocks
Investment withdrawal
Foreign investors have pulled out almost $3 billion from Indian stocks this month, on top of October's $11 billion outflow, putting further pressure on the INR.
India's top equity indexes, the BSE Sensex and Nifty 50, also fell 1% on Tuesday.
This is their fourth straight daily fall, further underlining the woes of the Indian currency.
RBI's intervention impacts foreign exchange reserves
Reserve impact
The RBI's intervention to limit the INR's losses has led to India's foreign exchange reserves falling for five consecutive weeks, hitting a two-month low of $682.13 billion on November 1.
While these measures may offer temporary respite, they also put pressure on the country's reserve levels meant to shield it from global uncertainties.