The Indian rupee could fall to an all-time low at the opening on Friday, after the Dollar Index hit its highest level in more than two years, following its rally over the past quarter.
The one-month non-deliverable futures contract indicates that the rupee will open at 85.80-85.82 to the US dollar, down from 85.7525 in the previous session and possibly beyond the low historic level of 85.8075 reached last Friday.
The Dollar Index rose 0.7% on Thursday, reaching 109.54, helped by data on jobless claims in the United States.
The index continued the momentum from December, when it rose 7.7%, thanks to Donald Trump's election victory and the Federal Reserve reducing its forecast for the number of times it will cut interest rate this year.
“The dollar, at the start of the year, is returning to the path it took in 2024. It seems that this rise in the dollar will not stop before Trump’s inauguration,” said a bank foreign exchange trader. .
“I'm a little surprised that we haven't seen a bigger rise (on the dollar/rupee)” given the rise in the dollar, he added.
The rupee's relatively small decline could be because the 85.80 level was defended quite strongly by the Indian central bank, according to traders.
Twice in the last week, the Reserve Bank of India sold dollars heavily near 85.80 to support the rupee.
The local currency struggled through much of December, forcing the central bank to intervene regularly to manage the pace of the decline.
In addition to the strong dollar, India's widening trade deficit and slowing portfolio flows have weighed on rupee demand.
KEY INDICATORS:
** One-month non-deliverable rupee forward exchange rate at 86.08; One month onshore forward premium at 24.5 paise.
** Dollar Index down to 109.16
** Brent up 0.3% to $76.1 per barrel
** Ten-year US bond yield at 4.56%.
** According to NSDL data, foreign investors sold $69.7 million worth of Indian stocks as of January 1.
** According to NSDL data, foreign investors sold $9.7 million worth of Indian bonds as of January 1.
