Indian Rupee: The Indian rupee hit its all-time low of Rs 84.282 against the US dollar on Wednesday (November 6), when the dollar index hit a four-month high. The depreciation came after Republican candidate Donald Trump won the US presidential race, raising expectations that his inflationary policies could give a further boost to the dollar’s strength.
Indian Rupee: In a single day, the rupee fell 17 paise, its biggest fall in four months. The rupee touched an intra-day low of Rs 84.33 and closed at Rs 84.295 per dollar, according to Financial Express, according to data from the Clearing Corporation of India. Forex dealers believe that the rupee may fall further in the coming days and it can go up to Rs 84.40.
Despite this record low, the rupee has remained quite resilient compared to other Asian currencies as the Reserve Bank of India (RBI) has intervened to limit its fall against other emerging market currencies. However, forex experts say that while the RBI’s intervention may stabilise the volatility a bit, it will not have a significant impact on the overall direction of the rupee as the dollar is strengthening globally.
US 10-year Treasury yields have also risen, rising 17 basis points to 4.44%, a four-month high, putting further pressure on the rupee. Market participants attribute this rise to a possible return from Trump, which could be supported by anti-dumping duties and tariffs, which could boost inflation, and slow US Federal Reserve rate cuts, which could lead to higher yields and a stronger dollar.
“Given Trump’s stance on tariffs and the history of his expansionary policies, inflation in the US could rise again, which could have an impact on the tightening rate environment and higher dollar yields, which will directly impact the rupee,” Jigar Pandit, Senior Vice President of Commodities and Currency at Sharekhan, told Financial Express.
The RBI is expected to take a cautious approach in market interventions, with a focus more on reducing volatility rather than trying to influence the direction of the rupee. The rupee outlook is complicated for importers, who are worried about further depreciation, leading to significant sell-off in the market.
Meanwhile, Trump’s potential fiscal policies could push up US Treasury yields, which would attract investors towards dollar-denominated assets and boost demand for the dollar. Market participants say that if the dollar’s strength remains maintained, emerging markets could come under strain, and investors could shift towards dollar-backed assets, which could trigger outflows from domestic equity markets.
