New Delhi: Facing pressure from a dip in the Chinese yuan and a strongly performing US dollar, the rupee on Friday (January 3) closed at a record low of 85.77 to the dollar, as per Reuters.
That the RBI likely sold dollars saved the rupee from slipping past its record low against the dollar of 85.8075 that was seen last week, the news agency cited traders as saying.
Rising crude prices also pressured the rupee, PTI cited analyst Jateen Trivedi as saying.
The yuan closed onshore yesterday at 7.3093 against the dollar – which Reuters reported was its lowest since November 2023 – due to weak sentiment resulting from poor yields as well as expectations of rate cuts and that the incoming Trump government will impose higher tariffs on China.
Tariff promises, including those that particularly targeted China, had marked Trump’s election campaign last year.
It did not help the rupee that there has been a rally in the dollar as of late. The dollar index, which measures the currency’s strength against a basket of six other currencies, recorded a two-year high of 109.54 on Thursday, though it declined to 108.91 yesterday, reported Reuters.
At any rate it is set to perform its strongest in a month owing to expectations of the US economy outdoing its global counterparts and of relatively high interest rates in that country, the news agency also said.
Jigar Trivedi, a senior analyst at Reliance Securities, told Reuters that the rupee could touch 86 against the dollar in the near-term.
The Hindu Businessline cited economists at Deutsche Bank India as saying that the rupee would likely depreciate regardless of whether the RBI implemented rate cuts.
They forecasted that the rupee would depreciate to 87 to a dollar by end-March 2026 or earlier “if the tariff war escalates more than what we have factored in at this stage and the RBI relaxes its FX [foreign exchange] intervention strategy”.
The “inter-temporal volatility of capital flows is likely to exert pressure on the rupee (as is the case currently), as long as the broad dollar index continues to strengthen,” they were also quoted as saying.
Many are hoping for a shift in the RBI’s monetary policy under new governor Sanjay Malhotra and a potential rate cut by its monetary policy committee in February 2025.
Meanwhile, the RBI in a press release yesterday said that India’s foreign exchange reserves as of December 27 dipped by Rs 2,082 crore or $4.1 billion compared to the previous week.
Its value of Rs 54.77 lakh crore or $640.3 million was the lowest in eight months, according to Reuters.
