Mumbai:
In the midst of a robust dollar rally fueled by recent economic indicators and policy shifts, the Indian rupee is poised to hit a new all-time low against the US dollar on Friday in Mumbai. The dollar index, which measures the strength of the US currency against a basket of major currencies, surged 0.7% on Thursday to reach 109.54, its highest level in over two years.
The 1-month non-deliverable forward rates suggest the rupee could open between 85.80 and 85.82 against the US dollar, potentially breaching the previous all-time low of 85.8075 recorded last Friday. This downward trend is exacerbated by the dollar’s continued strength, which has been bolstered by positive US jobless claims data and the Federal Reserve’s adjusted interest rate forecasts.
“The dollar’s momentum from 2024 is carrying over into the new year, and it seems this rally will persist at least until the Trump inauguration,” noted a currency trader at a local bank. Despite the significant rise in the dollar, the rupee’s decline has been relatively mild, partly due to the Reserve Bank of India’s (RBI) intervention. The RBI has sold dollars heavily near the 85.80 mark on two occasions in the last week to stabilize the rupee.
India’s economic challenges, including a widening trade deficit and slowing portfolio flows, have further weakened demand for the rupee. Foreign investors have also been selling Indian shares and bonds, with NSDL data showing a net sale of $69.7 million in shares and $9.7 million in bonds on January 1.
Key indicators highlight the broader economic context: the dollar index stands at 109.16, Brent crude futures are up 0.3% at $76.1 per barrel, and the ten-year US note yield is at 4.56%. The onshore one-month forward premium is at 24.5 paise, and the one-month non-deliverable rupee forward is at 86.08.
