The Indian rupee fell to an all-time low on Tuesday, pressured by a rally in the US dollar against its major counterparts and concerns over the Asian country’s slowing growth rate.
The rupee hit an all-time low of 84.7425 against the dollar, narrowly surpassing its all-time low of 84.7050 hit on Monday. Its Asian peers were mostly weaker, with China’s offshore yuan falling to its lowest level in a year, while the dollar index rose to 106.50 on euro weakness.
The rupee’s fall from 84.50 to the current level “came without much resistance, relatively speaking”, said a bank forex trader.
“The price action suggests that either intervention by the Reserve Bank of India (RBI) has been relatively muted or that underlying demand for dollars is too strong. Either way, this is a worrying sign (for the rupee),” the forex trader said.
The rupee fell 0.25% on Monday in the wake of disappointing Indian GDP data. This is the currency’s largest percentage decline in six months.
The extent of the rupee’s decline, while largely in line with other Asian countries, surprised bankers and businesses, given that the RBI has intervened continuously over the past few months to maintain the currency at key levels.
India’s weak GDP growth is expected to further weaken portfolio investor sentiment, Dhiraj Nim, FX strategist and economist at ANZ, said in a note.
The country’s “lower macroeconomic setup” as well as the recent decline in the RBI’s foreign exchange reserves strongly suggest that a “weakening of the rupee seems inevitable”, he said.
India’s foreign exchange reserves have fallen for eight consecutive weeks to their lowest level in five months.
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