Rupee weakens past 84-mark for first time against US dollar on foreign outflows

The Indian rupee weakened past 84 mark for the first time.

The Indian rupee weakened past 84 mark for the first time against the US dollar, pressured by foreign outflows from stocks and bonds, along with a less hawkish central bank stance.

The currency slipped 0.1 percent to a record low of 84.11 on Friday. FIIs have offloaded $5.7 billion in stocks and $125 million in bonds this month, as per NSDL data.

Analysts noted that recent Chinese economic policies have redirected investment flows towards China, drawing funds away from other economies, including India. China's benchmark index has gained about 25 percent following these measures. Geopolitical uncertainties have also fueled risk-off sentiment, driving Brent Crude prices higher. Meanwhile, the US Fed's cautious stance on aggressive rate cuts has led to a sharp rally in the dollar.

Amit Pabari, CR Forex advisors said these factors have significantly weighed on the Rupee. However, with the RBI's intervention anticipated, backed by record-high reserves and the 84.10 level serving as a strong resistance, a pullback below 84 could materialize once FII outflows subside. Notably, USDINR forward premiums have also declined as Fed rate cut expectations diminish, even though the spot rate has risen.

Kunal Sodhani, Vice President at Shinhan Bank, noted that interventions in USD/INR have occurred at various intervals. He identified 83.80 as a support level for the pair, with 84.15 serving as immediate resistance—reflecting the NDF traded highs—followed by 84.50.

Meanwhile, Asian currencies were trading higher. Indonesian rupiah was up 0.6 percent, Thai Baht gained 0.47 percent, South Korean won rose 0.42 percent, Philippines peso, China Offshore spot and Malaysian ringgit jumped 0.15 percent each. Among losers, the Japanese yen fell 0.16 percent.

In the October monetary policy, Reserve Bank of India (RBI) Governor Shaktikanta Das said that during the current financial year (up to October 8), the exchange rate of the Indian rupee (INR) remained largely range-bound. The INR also continued to be the least volatile among peer EME currencies. This was so even during the high volatility episode, following the unwinding of yen carry trade in early August 2024. The lower volatility of the INR reflects India’s strong macroeconomic fundamentals and improved external sector outlook.

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