Key Points:
The Indian rupee reached an all-time low on Monday, slipping to 84.0725 against the U.S. dollar due to sustained dollar demand from foreign banks.
Persistent outflows from Indian equities, with $8 billion pulled in the last ten sessions, have added to the pressure.
The Reserve Bank of India (RBI) has been actively intervening in the foreign exchange markets to stabilise the rupee, but despite its efforts, the currency fell to a record low.
Intervention typically involves the RBI selling its dollar reserves to prevent excessive depreciation of the rupee.
Traders expect the dollar-rupee pair to stay between 83.95 and 84.20 in the near term, with the RBI’s intervention and potential easing of equity outflows offering a chance for the rupee to stabilise.
China’s recent announcement of fiscal support failed to reassure markets, as it lacked specific measures or scale, leading to continued scepticism about the recovery of Asia’s second-largest economy.
This underwhelming stimulus weighed on currencies like the yuan, which fell 0.9% against the dollar since late September, and by extension, it pressured currencies across the region.
Asian currencies, including the Indian rupee, lost ground by 0.1% to 0.3%, reflecting the interconnected nature of regional economies.
The recent depreciation shows that while central bank interventions can offer temporary relief, global factors override policy efforts.
This is especially the case when liquidity is thin, as seen with the Japanese holiday slowing market activity.
Rupee Drops to Record Low
Picture: USD/INR consolidates around 84.20, with weakening momentum reflected in MACD, as traders monitor resistance near 84.265 and support at 84.067, as seen on the VT Markets app.
The USD/INR chart shows a close around 84.199, with a session high at 84.265 and a low near 84.163, matching the observations.
MACD confirms weakening momentum with the MACD line dipping below the signal line, reflecting a potential short-term pullback.
The moving averages (5, 10, and 30-period) are slightly diverging, signaling consolidation near current levels.
Brent crude oil prices, down slightly to $78 per barrel, remain a concern as markets monitor tensions in the Middle East that could disrupt supply.
See also: Oil Prices Fall with China’s Slowing Economy
Traders will also be watching for insights from Fed Governor Christopher Waller’s speech, which may provide signals on future U.S. policy rates.
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