Rupee plunges to all-time low of 84.38 against US dollar

The rupee dropped to a new low of 84.3875 in early trading, surpassing its previous record set last Friday.

In Short

• Rupee hits record low post Donald Trump's US election win
• RBI intervenes to stabilise rupee amid continuous stock outflows
• Asian currencies decline due to stronger dollar positioning

The rupee hit a record low against the US dollar on Monday, as concerns surrounding the recent victory of Donald Trump in the US elections put Asian currencies under pressure. Continuous outflows from Indian stocks further weakened the rupee, sparking a wave of caution among traders and investors alike.

The rupee dropped to a new low of 84.3875 in early trading, surpassing its previous record set last Friday. It was trading at 84.37 by 9:40 a.m. Despite these pressures, traders noted that the Reserve Bank of India (RBI) intervened to prevent further losses.

ASIAN CURRENCIES HIT BY STRONGER DOLLAR

Across Asia, most currencies saw declines between 0.1% and 0.4% on Monday. The US dollar index, which measures the dollar’s value against a basket of major currencies, remained near its four-month high at 105, following Trump’s win. This strength in the dollar has contributed to the rupee’s recent struggles, pushing the currency into a difficult position in the market.

RBI INTERVENTION HELPS STABILISE THE RUPEE

The RBI has been actively intervening to curb the rupee’s slide, according to traders. State-run banks were reportedly selling dollars on Monday, possibly on behalf of the RBI, to reduce the impact on the rupee. The central bank has regularly stepped in over the past week, preventing the rupee from facing sharper declines.

These interventions, however, have come at a cost. India’s foreign exchange reserves dropped for the fifth consecutive week, hitting a two-month low of $682.13 billion as of 1 November. While this action helps in the short term, it puts pressure on the country’s reserve levels, which are meant to safeguard against global uncertainties.

FOREIGN INVESTORS PULL MONEY FROM INDIAN STOCKS

Foreign investors have been offloading Indian stocks at a notable pace, adding further pressure on the rupee. November alone has seen net outflows of approximately $2.5 billion from Indian equities, following a significant outflow of $11 billion in October. This capital flight has weakened the local currency and contributed to the underperformance of Indian markets.

Major stock indices, the BSE Sensex and the Nifty 50, were down slightly on Monday, marking a fifth week of decline in the last six weeks.

Market experts say the rupee could remain weak until there is a shift in the dollar index or a reduction in foreign institutional investor (FII) outflows.

Amit Pabari, Managing Director at CR Forex, told Reuters, “The rupee is likely to remain under pressure unless there is a softening in the dollar index or a slowdown in FII outflows.”