Indian rupee hits record low amidst yuan weakness

The Indian rupee recorded a new all-time low on Wednesday due to a decline in the Chinese yuan and increased dollar demand in the non-deliverable forwards (NDF) market. However, the Reserve Bank of India‘s (RBI) intervention helped to mitigate the losses.

The rupee closed at 84.83 against the US dollar, slightly higher than its low of 84.8650. In December, the rupee has weakened by 0.4 per cent, lagging behind other regional currencies.

This is due to concerns about economic growth and the appointment of a new RBI chief, leading to expectations of rate cuts next year, which have impacted the local currency.

The RBI’s dollar-selling intervention through state-run banks helped the rupee avoid significant losses, according to traders.

The offshore Chinese yuan also dropped by 0.4 per cent to 7.28 amid reports that China may allow the yuan to weaken next year to cope with higher tariffs, impacting other Asian currencies.

The dollar index rose 0.2 per cent to 106.5 before the release of key US inflation data on Wednesday, which will influence future Federal Reserve interest rate decisions.

“While it is tempting to say that the Fed has moved on from the inflation story, any upside surprise to the already high consensus expectation for core inflation at 0.3 per cent month-on-month would likely send the dollar higher,” ING Bank said in a note.

Attribution: Reuters

Subediting: Y.Yasser