The rupee fell to an all-time low of 84.38 per dollar on Friday due to demand for dollars from foreign portfolio investors, who have been selling in Indian stock markets for the past month or so, and oil companies.
Although positive at 84.3225 per dollar, compared to the previous close of 84.3775, strength could not be maintained for the reasons mentioned above. During the day, the Indian unit touched an all-time low of 84.38 and closed barely changed at 84.3750.
Forex dealers said the RBI is keeping a tight rein on the rupee’s movement by putting a small portion of its huge stock of forex reserves to good use by selling dollars.
They noted that one of the reasons why reserves have fallen below $700 billion in recent weeks is due to the central bank’s intervention in the foreign exchange market. India’s foreign exchange reserves stood at $682.130 billion as of November 1, 2024.
“The RBI seems to be allowing a gradual depreciation of the rupee. This is probably the best way to manage our currency in light of a strengthening dollar and the likelihood that China will devalue its currency, as newly elected US President Donald Trump may impose high tariffs on imports from China once he comes to power.
“So, the rupee needs to adapt to the movement of the yuan to ensure that our exports remain competitive,” said Rama Chandra Reddy, finance chief at Karur Vysya Bank.
Meanwhile, the benchmark 10-year Treasury note (7.10 percent GS 2034) opened lower at 6.80 percent, following an overnight decline in Treasury yields (following the outcome of the FOMC meeting), Nuvama Wealth Management said in a report.
However, sharp movements in interest rates were limited and some gains were made in the afternoon. The benchmark paper’s yield closed trading at 6.81 percent, compared to the previous closing price of 6.83 percent.
