On Thursday, the Indian rupee depreciated, influenced by heightened year-end dollar demand from importers and a cautious market sentiment amid a sudden halt in global equity rallies.
As of 10:50 a.m. IST, the rupee stood at 83.25 against the U.S. dollar, marking a 0.1% decrease compared to its previous close at 83.17.
The persistent dollar demand from importers is expected to endure through the year-end, according to a foreign exchange trader at a state-run bank. The trader noted, “Mostly people square their positions at this time, hence dollar demand will be there.”
The dollar index, which experienced a nearly 0.3% increase overnight on Wednesday, saw a slight dip to 102.3. Meanwhile, broader Asian currencies generally remained subdued.
In the backdrop of global financial dynamics, the 10-year U.S. Treasury yield dropped to its lowest level since July in New York, currently quoted at 3.86%. The 2-year yield also slipped by 7 basis points to 4.36%, exhibiting little change during Asia hours.
Risk aversion played a role in the rupee’s decline as optimism from equity rallies, driven by expectations of Federal Reserve rate cuts in 2024, waned. The S&P 500 Index recorded its worst session in nearly three months on Wednesday. Domestically, benchmark equity indices Nifty 50 (.NSEI) and BSE Sensex (.BSESN) witnessed slight declines on Thursday.
In this complex economic landscape, the rupee faced dual pressures from both external factors, such as global market trends and dollar dynamics, and internal factors like domestic equity performance. As the year-end unfolds, the rupee’s trajectory remains subject to the delicate balance between these influencing factors, creating a challenging environment for currency markets. Traders and investors are closely monitoring these developments to gauge the rupee’s resilience amid evolving global and domestic economic conditions.