RUPEE HITS RECORD LOW AGAINST DOLLAR AMID TRUMP’S VICTORY

Thu 07 November 2024:

New Delhi: The Indian rupee fell to an all-time low of Rs 84.282 against the US dollar on Wednesday (November 6), pressured by a strengthening dollar index that reached a four-month high. The depreciation comes as Republican candidate Donald Trump won the US presidential race, sparking expectations that his inflationary policies may further boost the dollar’s strength.

In a single day, the rupee fell by 17 paise, marking its steepest decline in four months. According to data from the Clearing Corporation of India, the rupee hit an intra-day low of Rs 84.33 before closing at Rs 84.295 per dollar, reported the Financial Express. Forex dealers anticipate a further dip in the rupee in the coming days, with a potential to reach Rs 84.40.

Despite this record low, the rupee has been relatively resilient compared to other Asian currencies, owing to intervention from the Reserve Bank of India (RBI), which has managed to limit its decline against other emerging market currencies. However, forex experts warn that while RBI intervention may stabilise volatility, it may not significantly influence the rupee’s broader trajectory as the dollar strengthens globally.

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US 10-year Treasury yields also surged, rising by 17 basis points to a four-month high of 4.44%, adding further pressure on the rupee. Market participants attribute this rise to Trump’s possible return to policies that favour anti-dumping duties and tariffs, which could stoke inflation and potentially slow down rate cuts by the US Federal Reserve, leading to higher yields and a stronger dollar.

“With Trump’s stance on tariffs and his history of expansionary policies, inflation may rebound in the US, potentially leading to a tightening rate environment and higher dollar yields, directly impacting the rupee,” Jigar Pandit, senior vice president of Commodities and Currency at Sharekhan told the Financial Express.

The RBI is expected to maintain a cautious approach to market intervention, focusing on reducing volatility rather than trying to influence the rupee’s direction. The outlook for the rupee is complicated by concerns among importers, who are bracing for further depreciation, leading to a significant sell-off in the market.

Meanwhile, Trump’s potential fiscal policies could drive up US Treasury yields, attracting investors to dollar-denominated assets and increasing demand for the dollar. Market participants warn that the continued strength of the dollar may put emerging markets under strain, prompting investors to seek dollar-backed assets and potentially leading to outflows from domestic equity markets.

This article originally published in The Wire click here