Indian rupee hits lifetime low as Trump's win boosts USD
What's the story
Despite intervention from the Reserve Bank of India (RBI), the Indian rupee (INR) has hit a historic low against the US dollar (USD). The currency fell to 84.2950 today, surpassing its previous all-time low of 84.28 set on Wednesday. The decline is attributed to investor expectations that Donald Trump's policies will strengthen the USD in upcoming months.
Policy impact
Trump's policies and market response
Analysts believe Trump's tax cuts and deregulation policies could spur US growth, prompting investors to prefer the dollar over other currencies. This move is likely to hurt the euro and Asian currencies amid possible tariff threats. Despite a 1.8% decline in Asian currencies in the last session, they remained stable on Thursday as the dollar index fell marginally by 0.1% to 104.9.
Market outlook
RBI's intervention and market expectations
Market participants expect more RBI intervention to prevent drastic rupee fluctuations. A state-run bank trader told Reuters that the RBI is "slowly letting it (USD/INR) move higher but the upside should be limited near 84.40 in the near term." However, continued outflows from Indian stocks are putting more pressure on the currency with foreign investors having sold over $1.5 billion worth of equities in November alone.
Performance analysis
Equity market performance and future rupee depreciation
India's key equity indices, the Sensex and Nifty 50, also fell by over 1% each today, causing investors to lose nearly ₹4 lakh crore. Citibank analysts have said that future rupee depreciation will depend on RBI intervention and India's inflation differential with the rest of the world. Investors are now waiting for the US Federal Reserve's policy decision due post-midnight, which is likely to further impact currency trends.