The Indian rupee recorded a new record of weakness against the dollar on Monday, weighed down by still high inflation and the withdrawal of foreign investors attracted by other destinations.
The currency of the world’s most populous country fell as low as 84.3998 rupees per dollar.
Since the election of Donald Trump to the American presidency, it has dropped 0.33%, a marked development for a currency whose movements are partially controlled by the central bank, the RBI (Reserve Bank of India).
For Amartya Lahiri, professor of economics at the University of British Columbia (Canada), this slide is the product of several combined factors.
The first is inflation, which has been significantly higher in India than in the United States for decades. In September, prices accelerated, up 5.5% year-on-year, to their highest level in nine months, after a clear lull in July and August.
This surge in inflation contrasts with the calming down in the United States, where the PCE index, which serves as a reference for the American central bank (Fed), fell to 2.1%, still in September, at its lowest. for three and a half years.
“This puts pressure on the rupee and pushes it to depreciate,” explains Amartya Lahiri.
Added to this underlying trend is “the portfolio rebalancing carried out by many foreign institutional investors, who are withdrawing their money from India” to put part of it in China or Singapore, according to the academic.
In October, sales of Indian stocks by foreign investors reached their highest level since March 2020, the early days of the coronavirus pandemic.
The wave of support measures announced by the Chinese authorities to try to revive the economy has boosted the People’s Republic stock market and attracted foreign capital.
“And now with the American election, the money will flow towards the United States too,” anticipates Amartya Lahiri.
Investors see a new term of Donald Trump as favorable to the American stock market as well as the dollar. They also expect inflation to rebound, which has boosted bond yields.
The yield on 10-year US Treasury bonds is close to its lowest gap since 2006 with Indian government bonds of the same maturity.
This tightening is all the more remarkable since the Fed and RBI diverge on monetary policy.
The Federal Reserve lowered its key rate for a second consecutive time on Thursday, while the RBI has not touched its rate for 19 months.
© Agence France-Presse
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