What’s going on here?
The Indian rupee (INR) made a slight rebound to 83.9150 against the US dollar this morning, up from 83.9525 in the preceding session.
What does this mean?
The minor recovery comes on the heels of the rupee hitting a record low of 83.96 against the US dollar on Tuesday. This decline followed a broader drop in Asian currencies and the unwinding of carry trades funded by the Chinese yuan and Japanese yen. The Reserve Bank of India (RBI) intervened to prevent further depreciation, directing major banks to limit speculation as the currency neared the crucial 84/$ mark. Despite the RBI’s efforts and tempered speculation, importers’ hedging demand and strong dollar bids in the non-deliverable forward (NDF) market have restrained the rupee’s recovery. Meanwhile, the dollar index has risen by 0.3% to 103.3, influenced by renewed volatility and concerns over a US economic slowdown.
Why should I care?
For markets: Indian equities find solace.
The BSE Sensex and Nifty 50 benchmark indices both climbed by over 1% following a two-day dip, signaling investor confidence amid the rupee’s modest gains. However, foreign investors remained cautious, pulling out over $1.5 billion from local stocks in the past two sessions due to a global equity downturn.
The bigger picture: A watchful Fed and a volatile outlook.
The broader economic landscape remains uncertain. DBS Bank remarked that the Federal Reserve is likely to resist aggressive rate cuts, sustaining support for the US dollar. With the dollar index buoyed by a 0.3% increase and volatility in Asian currencies heightening, the rupee’s path forward is anything but clear.
