Rupee hits new intraday low of 84.40 against US dollar on FPI selling

The rupee depreciated to a new intraday low of 84.41 per dollar as foreign portfolio investors continued selling domestic equities amid persisting demand for the greenback, said dealers.

 

The Indian unit settled at 84.39 per dollar on Tuesday, the same level as Monday. The dollar index rose to 105.83, while the US 10-year treasury yield climbed to 4.36 per cent.

 

The local currency has been touching new lows over the past few trading sessions as the dollar index has strengthened post-Donald Trump’s victory last week. This is amid growing expectations that any protectionist trade and immigration policies could increase long-term inflation pressures and keep interest rates elevated. This may disrupt the Federal Reserve’s potential rate-cutting cycle. October inflation is anticipated to remain stubbornly high, adding to this pressure. Additionally, several Federal Reserve officials are scheduled to speak this week, fueling uncertainty over whether the Fed will cut rates in December. 

 

“The US yield has gone up, and Asian currencies have depreciated. The rupee is expected to cross 84.50 per dollar to 84.60 per dollar by the end of the month,” said V R C Reddy, treasury head at Karur Vysya Bank.

 

“Directionally, the rupee is in a depreciation bias. The Reserve Bank of India (RBI) is intervening continuously, but that is very gradual,” he added.

 

On the domestic front, India's consumer price index- (CPI-) based inflation for October rose to 6.21 per cent, largely driven by food prices, which surged to 10.87 per cent from 9.24 per cent in the previous month. While elevated inflation was anticipated, the print above 6 per cent — the upper limit of the RBI’s tolerance band — increases the likelihood that the Monetary Policy Committee (MPC) may delay any policy easing.

 

“With CPI inflation breaching the 6 per cent mark in October 2024 and expected to exceed the MPC’s estimate for Q3 FY2025 by at least 60-70 basis points (bps), a rate cut in the December 2024 policy review appears ruled out, despite our projection of sub-7 per cent GDP growth for Q2 FY2025. We anticipate that a shallow rate cut cycle of 50 bps may commence in February 2025 or later,” said Aditi Nayar, chief economist, ICRA.