Rupee hits record low on Monday

The Indian rupee plummeted to a record low on Monday, pressured by a combination of factors including potential outflows from domestic equities and the unwinding of carry trades.

Benchmark Indian equity indices, the BSE Sensex and Nifty 50, suffered their worst single-day decline in over two months.

The rupee closed at 83.8450, a decline of 0.1 per cent from the previous session’s close.

Aggressive dollar buying from foreign banks, likely acting on behalf of custodial clients, intensified pressure on the rupee throughout the day.

However, intervention by the Reserve Bank of India (RBI) helped to limit losses.

The dollar index weakened, while other Asian currencies strengthened, highlighting the rupee’s divergence from regional peers.

This was primarily due to the unwinding of carry trade positions, where investors borrow in low-yielding currencies like the yen to invest in higher-yielding assets.

Market participants anticipate continued volatility in the dollar-rupee pair, with potential resistance around the 84 level and support at 83.65. The RBI is expected to intervene aggressively if the rupee approaches the 84 level.

Attribution: Reuters