ISLAMABAD: A spike in US bond yields pushed the dollar higher, and importers’ strong demand for the US dollar added to the ongoing pressure on the Indian rupee, which fell to its lowest level in six straight trading sessions on Tuesday.
The rupee declined to 85.2075 against the US dollar, eclipsing its previous record low of 85.12 hit on Monday.
It ended the session at 85.20, down 0.1 per cent on the day, according to Reuters.
Reserve Bank of India’s intervention
The Reserve Bank of India’s intervention, likely via dollar sales, again helped limit the rupee’s losses, traders said.
However, the “RBI doesn’t seem to defending any level right now but is just curbing volatility, which signals steady rupee depreciation will continue,” a trader at a state-run bank said.
Factors hurting rupee
A multitude of factors have hurt the rupee this quarter, including tepid capital flows, a widening of India’s trade deficit, concerns about slowing economic growth and, most recently, a hawkish shift in the Federal Reserve’s outlook for benchmark interest rates.
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The dollar, already boosted by the anticipation of US President-elect Donald Trump’s return to the White House in January, has climbed further, alongside US bond yields, after the Fed scaled back its projected rate cuts over 2025 at its December meeting.
The 10-year US Treasury yield rose to a near seven-month high of 4.59 per cent on Monday and was little changed in Asia trading.
The dollar, already boosted by the anticipation of US President-elect Donald Trump’s return to the White House in January, has climbed further, alongside US bond yields, after the Fed scaled back its projected rate cuts over 2025 at its December meeting.
The dollar index was up slightly at 108.2 and has risen over two per cent so far this month, on course for its third consecutive monthly rise.
Given the host of negative global and domestic cues, “the rupee is likely to witness a slow and steady deprecation from these levels,” said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
Parmar expects the rupee to weaken to 85.50 over the next two weeks.
