RBI helps rupee outperform peers in month marred by US election anxiety

The Indian rupee was little changed on Thursday, similar to most of this month during which the central bank's stranglehold on the currency helped it avoid the pressure on its Asian peers from the rising odds of Donald Trump winning the US elections.

The rupee was at 84.0825 to the US dollar, little changed from Thursday and week-on-week. Indian financial markets are shut on Friday.

Asian currencies had a choppy month as betting markets flipped to price in a higher chance of Trump winning the Nov. 5 election. Trump has vowed to impose a 10 per cent tariff on imports from all countries and 60 per cent duties on imports from China.

The offshore Chinese yuan dropped to a 2-1/2-month low this week and is down 1.5 per cent this month. Other Asian currencies have fared worse, falling between 3 per cent and 5 per cent.

The RBI's relentless intervention has helped the rupee. The central bank has sold dollars on almost all days in the last two weeks, not allowing the rupee to fall and dampening volatility.

The rupee's 1-month volatility is less than 1 per cent in contrast to other Asian currencies. The surge in the dollar index and the rise in Treasury yields have had no impact on the rupee.

Equity outflows

The rupee's lack of volatility is all the more remarkable considering foreign investors are withdrawing money from Indian equities at a record pace.

They have taken out nearly $11 billion, on a net basis, from Indian equities in October, a sharp U-turn from the $7 billion inflows in September.

The RBI is supplying dollars to fund the foreign outflows, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

He recommends exporters "wait and watch" following the rupee's drop past 84 and that importers hedge on dips in the dollar/rupee pair.