What’s the story
The Indian Rupee (INR) hit a historic low in its closing value today, ending at 84.0725 against the US Dollar (USD).
The slight fall from the previous close of 84.0650 was due to continued USD outflows, and a broad decline among Asian currencies.
However, possible intervention from the Reserve Bank of India (RBI) prevented the INR from falling further.
USD demand and foreign investment withdrawal impact INR
The market saw a rise in demand for USD from foreign banks, probably on behalf of their custodial clients.
Meanwhile, state-run banks kept a steady supply of USD, which prevented the INR’s fall.
A major reason for the INR’s fall was the withdrawal of over $9 billion by foreign investors from local stocks this month alone.
Asian currencies and equity indices face downturn
Asian currencies also fell, losing between 0.1% and nearly 1%.
The Dollar index climbed to 103.7, up nearly 3% in October alone.
The surge was driven by expectations of less aggressive rate cuts by the Federal Reserve, and increasing chances of Donald Trump‘s victory in the upcoming US presidential election.
Market anticipates RBI’s rate cut decision
ING Bank observed, “FX markets seem to be positioning for a Trump victory in next month’s US presidential election.”
Meanwhile, USD-INR forward premiums witnessed an uptick with the 1-year implied yield, rising by five basis points to 2.24%.
The increase came after RBI Governor Shaktikanta Das‘s comments prompted traders to rethink the possibility of a December rate cut.
