Islamabad: The Indian rupee declined past an all-time low of 85 against the US dollar on Thursday after the Federal Reserve signalled fewer rate cuts next year.
According to Reuters, the development piled more pressure on a currency already struggling with tepid capital flows.
The rupee hit a low of 85.0675 against the US dollar, down from 84.9525 on Wednesday.
Slower growth
The pace of the currency’s fall to 85 handles from 84 has been faster than prior declines of the same magnitude, Indian news agency ANI reported.
India’s economic growth slowed to a seven-quarter low in July-September, the merchandise trade deficit is widening, and capital inflows are tepid, as per Indian media reports.
Persistent strength in the US dollar due to incoming US President Donald Trump’s expected policies has further undermined the rupee.
The Fed’s latest rate forecasts will provide an additional fillip to the dollar.
Reuters quoted Akshay Kumar, head of global markets at BNP Paribas India saying, “India’s sharply slowing growth, necessitating the central bank to deliver rate cuts sooner rather than later, is an added factor that is weighing on the rupee”.
“In the short term, we can expect upward pressure on USD/INR to remain,” Akshay Kumar said.
Investors raised their short positions on the rupee to a two-year high in December, according to a Reuters poll.
The rupee has weakened about two per cent so far this year and is in the middle of the Asia FX pack.
