The Indian rupee may open at a record low on Friday, as the dollar index jumped to the highest level since September last year. The 1-month non-delivery forward showed the rupee to trade around 85.80-85.82 to a dollar, below the previous session close of 85.7525 and potentially even touching last Friday’s record low of 85.8075.
The dollar index was higher by 0.7% to 109.54 on Thursday, helped by the strong US jobless claims figures. This rally is making its continuation of December’s growth, during which the index rose 7.7% due to Donald Trump’s victory and the Federal Reserve cutting its expected interest rates.
“The dollar has extended its 2024 rally into 2025 and this rally does not appear sustainable even until Trump inauguration,” said a currency trader of a leading bank. He pointed out that the rupee was weaker than other emerging market counterparts as dollar strength could have made this worse, yet RBI has provided some support.
Thus, the RBI has been most proactive in supporting the 85.80 level twice, intervening in the forex market last week to arrest the slide of the rupee. These interventions show the desire of the central bank to control the rate of depreciation of the rupee in spite of adverse factors in the global and domestic markets.
The high trade deficit of India as well as slow portfolio investment, has dented demand for the rupee further. There was especially a sharp decline in the local currency in December, with the RBI intervening mostly to prevent a steep deterioration.
The dollar has not weakened for any sign, and India is dealing with economic headwinds; the rupee has other troubles and headwinds ahead as well. The traders continue to keep an eye on more shenanigans from the central banks and other factors that influence movements in the global currencies.
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