The Indian rupee hit a record low on Wednesday. It fell to 84.9550 against the U.S. dollar before closing at 84.9525, down 0.07%. Strong dollar demand from importers and outflows from local equities added pressure.
Weakness in regional currencies further weighed on the rupee. This trend came ahead of the U.S. Federal Reserve’s policy decision. Speculative dollar bids also hurt the Indian currency.
RBI Intervenes to Limit Losses
The Reserve Bank of India (RBI) stepped in to curb the rupee’s decline. It likely sold dollars and conducted dollar-rupee buy/sell swaps. These measures aim to support the rupee without impacting foreign exchange reserves significantly.
Stock Markets Decline
Indian equity markets also fell on Wednesday. The BSE Sensex dropped 0.6%, and the Nifty 50 mirrored this decline. Concerns over India’s growth outlook added to investor worries.
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Comparison with Regional Peers
Despite the rupee’s fall, it fared better than many regional currencies. The rupee weakened 0.9% since Nov. 5, while other currencies dropped between 1.8% and 4.4%. Routine interventions by the RBI have limited the rupee’s losses.
Dollar Remains Strong
The dollar index stood at 106.7, reflecting over a 3% rise since Nov. 5. This strength followed Donald Trump’s recent election victory. The well-supported dollar maintained pressure on the rupee.
Global Markets Await Fed Decision
Globally, investors focused on the Federal Reserve’s policy projections. A 25 basis points rate cut to 4.25%-4.50% was fully priced in. Analysts expect fewer rate cuts in 2025 and 2026.
Societe Generale noted the Fed’s possible hawkish stance. It highlighted expectations for a pause in rate changes by January.
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