On Monday, maturing non-deliverable forward (NDF) positions and further market pessimism over the trade prospects in India dragged the Indian rupee to a new all-time low. India is one of the few large countries in the world with no trade agreement with the United States, even though it is the fastest growing major economy in the world, forcing investors to argue that this is bringing long-term uncertainty on trade and investment inflows.
In Monday, the rupee hit a record intraday low of 89.7575, and it has since gone up slightly to close at 89.5475, representing a 0.1 percent fall compared to the last close. This is on-going despite the fact that the Indian equity markets have been touching lifetime highs due to the good performance of the economy and good performance of the corporate earnings.
Nevertheless, the market observers note that the good performance of equities has failed to reflect on currency stability. The rupee has been under pressure throughout the year with the trade imbalances, uneven inflows of investments, and the global risk-off sentiment. India foreign exchange reserves listed at 688.1 billion in November 21 provide a large cushion, but have not done much to completely counter the declining trend in the currency in the face of endemic external head winds.
Monday also transferred the weakness of the rupee to the cross-currency markets and this saw the currency touching down an all time low of 12.69 against the offshore Chinese yuan. In the meantime U.S dollar index eased slightly and majority of Asian currencies traded in various directions, indicating that the world was not that confident.
The market analysts feel that the market in the rupee will largely rely on the dollar movements of the world, the trends in crude oil and how India can strengthen its trade associations. Until this point, there are high chances that currency volatility will continue being high, despite the macroeconomic indicators to reflect a robust domestic growth narrative.
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