Indian rupee plunges to all-time low against US dollar
The Indian rupee experienced another drop on Friday, hitting an all-time low of 83.7250 against the US dollar. This significant decline was primarily driven by weak risk appetite, persistent dollar demand from oil companies and custodial banks, and outflows from domestic equities. The previous record low for the rupee was set just two days prior at 83.72 against the dollar.
Domestic equities outflows and dollar demand pressure rupee
The rupee's decline was further exacerbated by approximately $1 billion in outflows from domestic equities throughout the week. A foreign exchange trader at a state-run bank pointed out that the dollar demand from local oil companies has added to this pressure on the rupee. Additionally, volatility in the Chinese yuan also played a role in the rupee's drop, posing a potential risk to carry trades between the two currencies.
Importers may take advantage of dollar dips
"Dollar demand continues to keep rupee offered. For the day ₹83.65-83.85 will be the range after a slightly weaker open from yesterday evening closure at ₹83.6975," said Anil Kumar Bhansali, head of Treasury and executive director of Finrex Treasury Advisors LLP. According to Bhansali, exporters should adopt a vigilant approach to currency hedging given the current market conditions. Importers, on the other hand, may purchase dollars when the exchange rate dips or implement a stop-loss order at ₹83.70.
