Source: Yahoo Finance

Rupee Hits All-Time Low Against the Dollar

The Indian rupee slid to its lowest-ever value against the U.S. dollar on Friday, surpassing the 86 rupees per dollar mark. This marked its tenth consecutive weekly loss, with the currency slipping past its previous record low of 85.9325 just a day earlier.* The rupee has been under continuous pressure due to a surging dollar and weak capital flows into the country.

The situation highlights broader regional challenges, as most Asian currencies remain under downward pressure since Trump’s victory in November.

Central Bank Steps In

The Reserve Bank of India has been actively intervening in the foreign exchange market to stabilize the rupee. State-run banks have been observed selling dollars, likely on behalf of the central bank, to manage volatility and slow the pace of the currency's depreciation.

However, despite routine interventions, the rupee continues to face strong headwinds, exacerbated by rising capital outflows. Foreign investors have already withdrawn over $3 billion from Indian stocks and bonds in January alone, contributing to the currency's weakness and heightened volatility.

Source: Yahoo Finance

Drivers of Dollar Strength

The U.S. dollar has been gaining strength due to a combination of factors, including robust U.S. labor market data and expectations that the Federal Reserve will maintain a cautious approach to interest rate cuts. The dollar index remains above the 109 level, reflecting its position near a two-year high. Non-farm payroll data released on Friday reaching XXX exceeded/fell short of expectations and show future Fed rate moves, with strong jobs figures likely delaying potential cuts.

Additionally, U.S. fiscal policies under former President Trump, including tax cuts and increased spending, have supported dollar strength in recent years by driving economic growth and boosting bond yields. These factors, along with global economic uncertainties, continue to attract capital to the U.S., keeping the dollar elevated and emerging market currencies like the rupee under pressure.

* Past performance is no guarantee of future results.