What’s going on here?
The Indian rupee hit a record low against the US dollar, even as other Asian currencies strengthened this month.
What does this mean?
Expected to open around 83.94-83.96 to the dollar, the rupee is on a six-week losing streak, recently touching a record low of 83.9725. Still, analysts aren’t panicking. The Reserve Bank of India (RBI) is stepping in to defend the 84 level through dollar sales in the spot and non-deliverable forward (NDF) markets, plus indirect interventions. A currency trader noted that current sentiment and flows don’t favor the rupee. Interestingly, it’s the only major Asian currency that’s lost ground against the dollar this month, while others have gained up to 3.3%.
Why should I care?
For markets: Navigating the waters of uncertainty.
The rupee’s struggle emphasizes the RBI’s significant control over its exchange rate, pointing to stability rather than crisis. Asian currencies remain steady, likely awaiting US consumer inflation data on Wednesday and retail sales data on Thursday. These figures will shape expectations for potential Federal Reserve (Fed) rate cuts, with a 100 basis point cut already priced in due to easing inflation worries and slow economic growth.
The bigger picture: Global economic shifts on the horizon.
Financial indicators paint a broader picture: the one-month NDF rupee forward stands at 84.01, the onshore one-month forward premium is 7 paise, the dollar index has dipped to 103.14, Brent crude is up 0.3% at $79.9 per barrel, and the ten-year US Treasury yield is at 3.94%. Importantly, foreign investors showed confidence in Indian assets, buying $62.1 million in shares and $46.4 million in bonds on August 8. These moves hint at a delicate balance in the global economic landscape.
