Rupee hits record low as US election news boosts dollar, RBI steps in

The Indian rupee weakened to an all-time low on Wednesday as early results of the US presidential election spurred a rally in the US dollar, prompting the central bank to intervene.

 

The rupee fell to 84.1950 against the dollar, down about 0.1 per cent from its Tuesday close. 

Other Asian currencies, however, fared much worse, with the offshore Chinese yuan, the Korean won, the Malaysian ringgit and the Thai baht down 1 per cent to 1.3 per cent. 

The rupee's relatively muted response was due to the Reserve Bank of India likely selling dollars, like it has done many times the last month. 

The RBI "may be okay with a gradual, calibrated depreciation of the rupee," but it will ensure that large moves are curbed, Ritesh Bhusari, joint general manager for treasury at South Indian Bank. 

"We don't see the rupee declining below 84.25 on a sustainable basis." 

The dollar index climbed 1.5 per cent to a four-month high of 105.19 as trends signalled an edge for Republican candidate Donald Trump, prompting interest in so-called 'Trump trades.' The odds of Trump winning the election jumped to nearly 90 per cent in the betting markets. 

Trump has vowed to impose a 10 per cent tariff on imports from all countries and 60 per cent duties on Chinese imports. In the run-up to the election, Trump said India charged high tariffs and that he would reciprocate if elected. 

US Treasury yields jumped with the 10-year yield up 15 basis points at 4.44 per cent, while US equity futures rallied. 

Projections showed that Trump had secured 230 electoral college votes, while Democrat candidate Kamala Harris had won 187 votes.