 "Rupee rebounds after hitting Rs 85.11, settles at Rs 85.02 per dollar")
The rupee settled at Rs 85.02 per dollar after a choppy trade on Friday. The local currency touched a new intraday low of Rs 85.11 per dollar before regaining ground against the greenback on the back of FTSE rebalancing inflows, said dealers.
The rupee had settled at Rs 85.07 per dollar on Thursday.
“The RBI was protecting the rupee at 85.10, but there was sufficient buying of the dollar, keeping the rupee in a range of 84.95 to 85.11 for the day. Due to FTSE rebalancing inflows of $1 billion, the rupee was allowed to gain up to 84.95 today but closed lower at 85.02,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Market participants said the rupee remained afloat in early trade as state-owned banks sold dollars on behalf of the Reserve Bank of India.
The week was marked by significant developments, with the Federal Reserve cutting interest rates by 25 basis points while maintaining a hawkish stance, signalling expectations of rising inflation. The central bank projected a 50 bps rate cut in 2025, followed by another in 2026. With 100 bps already cut in 2024, the Federal Reserve is likely to pause rate adjustments until mid-2026, with future decisions contingent on economic conditions post-President Trump’s inauguration on January 20.
On the political front, tensions heightened as President Trump called for an increase in the debt ceiling to be included in the spending bill.
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The dollar index climbed to a two-year high of 108.50, exerting pressure on emerging market currencies.
“The dollar will continue to remain strong until the new president reveals their actions on the economy. All indications are that they will aim to keep the dollar strong, and hence all currencies will have to adjust accordingly. The problem of depreciation is universal, and the actions of those competing with India need to be monitored closely,” said Madan Sabnavis, chief economist at Bank of Baroda. “Presently, the market will test the 85.50 mark, and it needs to be seen if this is crossed before the new president takes over. This issue will also play on the MPC as it would have a bearing on liquidity in the system,” he added.