MUMBAI: The Indian rupee continued its losing streak for the third consecutive day, plunging to an all-time low of 84.237 on Wednesday, rattled by early trends in the US presidential elections. Indications that Donald Trump was winning led to a rally in the dollar.
In intra-day trading, the currency dropped by 21 paise to a historic low of 84.30 against the greenback.
The rupee depreciated 21 paise to an all-time low of 84.30 (provisional) against the dollar but recovered most of the lost ground to close at 84.237, according to Reserve Bank of India (RBI) rates.
The rupee’s weakness was also attributed to continued Foreign Institutional Investor (FII) selling, though benchmark indices rallied more than 1.2 percent each on the day.
Market participants expect the US Federal Reserve to announce a rate cut in a meeting scheduled later this week, with further easing of up to 100 basis points projected for 2025.
At the interbank foreign exchange market, the rupee opened at 84.23. During the session, it fluctuated between a high of 84.15 and a low of 84.31. It finally settled at 84.30 (provisional), marking a loss of 21 paise compared to Tuesday’s closing.
“We expect the rupee to trade with a negative bias on strength in the dollar and FII outflows. However, a rise in risk appetite in global markets and a decline in commodity prices may support the rupee at lower levels. Any RBI intervention may also support the rupee at lower levels. The rupee spot price is expected to trade in a range of 84.10-84.40," said Anuj Choudhary of Sharekhan by BNP Paribas.
By evening IST, several American publications called the election, with Trump projected to win 277 electoral votes against his Democratic rival, the incumbent Vice-President Kamala Harris, who secured 224.
This result would make Trump the 47th President of the United States, marking his second term after missing a consecutive re-election in 2020.
His return to power, despite being convicted on 34 felony counts and facing several other criminal cases, is a first in over 150 years of American history.
Forex dealers mentioned that the rupee opened sharply lower at 84.1950 against the dollar, compared to Tuesday’s close of 84.1267. Despite intervention by the Reserve Bank, the pressure on the rupee remained intense, causing it to continue its decline and countering the central bank’s efforts.
Other Asian currencies fared worse in comparison. The offshore Chinese yuan, the Korean won, the Malaysian ringgit, and the Thai baht lost 1-1.3 percent, while the rupee saw a relatively modest decline of 0.2 percent.
“The rupee's relatively muted response was due to the Reserve Bank likely selling dollars, as it has done multiple times in the past month,” traders said.
Ritesh Bhusari, head of treasury at South Indian Bank, noted, “The RBI may be okay with a gradual, calibrated depreciation of the rupee, but it will ensure that large moves are curbed.” He added that he does not expect the rupee to decline below 84.25 on a sustainable basis.
Meanwhile, the dollar index surged 1.5 per cent to a four-month high of 105.19, as election trends continued to favour Trump.
The former president has pledged to impose a 10 per cent tariff on imports from all countries and a 60 percent duty on Chinese imports. During the campaign, he stated that India charges high tariffs, and he would reciprocate if re-elected.
