Rupee depreciates to a new intraday low of 84.52 against US dollar

The rupee had appreciated to a high of Rs 84.22 per dollar on Wednesday as the dollar index fell by 0.7 per cent after surging for the majority of the month

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The rupee depreciated to a new intraday low of 84.52 per dollar on Thursday, driven by month-end dollar demand and foreign portfolio investors (FPIs) selling domestic equities, according to dealers.

 

The Reserve Bank of India (RBI) intervened in the foreign exchange (forex) market by selling dollars during the closing hours, which helped the domestic currency recoup some losses.

 

The local currency settled at 84.49 per dollar on Thursday, compared to 84.45 per dollar on Wednesday.

 

“There was month-end dollar demand, and foreign banks were also buying dollars throughout the day,” said a dealer at a state-owned bank. “The RBI stepped in towards the end and could have sold around $600 million,” he added.

 

The dollar index rose by 0.25 per cent to 106.34 during the day as stronger-than-expected US data spooked investors, dampening expectations for a rate cut by the US Federal Reserve (Fed) in December.

 

The dollar index measures the strength of the greenback against a basket of six major currencies: euro, Swiss franc, Japanese yen, Canadian dollar, British pound, and Swedish krona.

 

According to the CME FedWatch tool, 70 per cent of investors expect the Fed to cut key rates by 25 basis points. The US economy grew by 2.8 per cent in the third quarter of 2024, driven by strong personal spending and a resilient labour market, with initial jobless claims steady at 213,000, better than the expected 215,000. 

 

In October, US Core PCE (Personal Consumption Expenditure) inflation increased by 0.3 per cent month-on-month and 2.8 per cent year-on-year, marking a six-month high.

 

Additionally, Brent crude oil prices rose by 0.08 per cent to $2.89 per barrel.

 

A stronger dollar index and capital outflows have contributed to a sharp decline in India’s forex reserves, which saw their largest-ever weekly drop of $17.7 billion in the week ending November 15. Total reserves fell due to a $15.5 billion decline in foreign currency assets during the week.

 

Forex reserves have dropped by $47 billion as of November 15, after peaking at $705 billion on September 27.

 

“Foreign institutional investor activity will play a crucial role in determining the rupee’s trend, as consistent outflows could further weaken the currency. The RBI’s reserves, which have fallen from $705 billion in October to $657 billion, add another layer of concern as the central bank monitors currency stability. Further intervention appears unlikely, leaving the rupee more susceptible to external pressures,” said Jateen Trivedi, vice-president of research, commodity, and currency at LKP Securities.

 

So far in November, FPIs have net sold Rs 8,735 crore worth of domestic equities. On Wednesday, they sold Rs 1,049 crore worth of equities.

 

The rupee had appreciated to a high of 84.22 per dollar on Wednesday as the dollar index fell by 0.7 per cent after surging for most of the month.

 

So far in November, the rupee has depreciated by 0.48 per cent. In the current financial year, it has depreciated by 1.29 per cent, while in the calendar year, it has dropped by 1.52 per cent.

 

The rupee is expected to trade in a range of 84.4 to 84.6 per dollar on Friday.