The Indian rupee declined to fresh low against the US dollar on Monday, as the demand for the greenback persisted. The Indian unit declined 4 paise to record low of 85.82 a dollar within one hour of session.
The currency had opened at Rs 85.77 against the greenback, according to Bloomberg. It had closed at Rs 85.78 on Friday.
“Reserve Bank of India has been vehemently protecting 85.80 for the moment, and despite a weakness in yuan, has not allowed the rupee to go past this level though eventually it may have to,” according to Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP.
Bhansali expects the dollar-rupee pair to trade in the range of Rs 85.65 to 85.90 on Monday, with dips to be bought with exporters on the watchful side for hedging.
While the RBI’s actions may offer some short-term stability, the rupee’s outlook remains clouded by a mix of domestic and global challenges. Amit Pabari, managing director of CR Forex Advisors, concurs.
Increased demand for the dollar in the non-deliverable forward market has widened the arbitrage gap between offshore and onshore markets, putting additional strain on the Rupee, Pabari said.
Slower economic growth and a widening trade deficit have further dampened investor sentiment, while ongoing capital outflows, exceeding $1 billion in the first week of 2025, have intensified the currency’s struggles, Pabari noted.
There is reason for cautious optimism, particularly with the upcoming Union Budget for 2025. The budget could play a pivotal role in shaping India’s economic trajectory amid concerns about slowing GDP growth and rising inflation, he said.
Dollar Index And Crude Oil
The current levels of the dollar index are at a 14-month low for the Chinese currency as growth in the second biggest economy floundered.
“The dollar held at nearly 2 years high at 108.88 while CNH gained slightly to 7.3513 after PBOC had aggressively defended the key levels of 7.30 for CNY. The investors were looking to NFPR data on Friday as a slew of Fed policymakers will speak during the week and the dollar continues to draw strength from fewer FED cuts in 2025 with its two-year high climb,” according to Bhansali.
Brent oil prices hit over two-month’s high in Asian trade this morning at $76.70 per barrel as traders looked to improving demand from China, though dollar strength did not allow any further strength.
It is two weeks of straight gains for crude prices as Beijing prepared to unveil more stimulus measures to improve falling economic growth. Colder weather in the West is also expected to bolster oil demand, according to Bhansali.
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