The Indian rupee narrowly avoided hitting a record low on Friday, likely due to intervention from the Reserve Bank of India (RBI), even as local equities experienced a significant decline.
Why it matters: The RBI’s intervention comes at a time when the Indian equity market faces increasing pressure, reflecting a global trend of cautious investor sentiment amid growing financial instability and economic downturn.
The details:
- Analysts suggest the RBI stepped in to stabilize the currency amidst the challenging global and local market conditions.
- The Indian equity market’s recent slide is attributed to factors such as investor caution ahead of crucial U.S. payroll data and a global economic downturn.
- An uptick in commodity prices has helped mitigate some of the declines in the Indian market.
The Indian rupee fell to a record low on Wednesday, pressured by strong demand for the U.S. dollar from importers. The currency was last trading at 82.72 per dollar, surpassing its previous low of 82.60.
What they’re saying:
- “The rupee is facing considerable pressure due to the increased dollar demand from importers. Additionally, global economic uncertainties and rising crude oil prices are exacerbating the situation,” said Siddhi Nayak, a market analyst.
The US dollar remains dominant in July, causing local currencies to fall precipitously against it. This trend persists despite various countries initiating de-dollarization campaigns aimed at diminishing the US dollar’s role as the world’s reserve currency.
The other side: The Reserve Bank of India has been involved in the foreign exchange market to mitigate the currency’s fall, although its interventions have been unable to prevent the rupee’s slide to historic lows.
What’s next: Analysts predict that the US dollar could drive the rupee to another low of 83.84 in the coming weeks, as local currencies remain under pressure while demand for the US dollar continues to grow.
Full story
The Indian Rupee narrowly avoided hitting a record low on Friday, likely due to intervention from the Reserve Bank of India (RBI). This occurred even as local equities experienced a significant slide. Market analysts believe the RBI took action to stabilize the currency amid growing global financial instability and a downturn in local markets.
The intervention comes as the Indian equity market faces increasing pressure, reflecting a global trend of cautious investor sentiment. Several factors have contributed to the recent slide in the Indian equity market. These include investor caution ahead of the release of crucial U.S. payroll data and a global economic downturn.
RBI intervention stabilizes falling Rupee
However, rising commodity prices have helped offset some of the declines. The Indian Rupee’s close call with a record low highlights the challenges faced by the RBI in managing the currency’s stability.
The central bank’s intervention, while successful in preventing a record low, underscores the ongoing pressures on the Rupee. As global economic uncertainties persist, the RBI will likely continue to closely monitor the Rupee’s performance. The central bank’s actions will be crucial in maintaining the currency’s stability and mitigating the impact of external factors on the Indian economy.
The Rupee’s brush with a record low serves as a reminder of the complex interplay between domestic and global economic forces. As India navigates these challenges, the RBI’s role in managing the currency will remain in the spotlight.
- Reuters.”Rupee averts record low on likely RBI intervention as local equities slide”.
- Reuters.”India rupee drops to record low, hit by importers’ dollar demand”.
- Watcher.”US Dollar Gives a Major Blow To BRICS Nations’ Currencies”.