Rupee ends at record low of 84.5013 against US dollar on FPI outflows pressure, strong DXY

Indian rupee

The Indian rupee ended at a record low against the US dollar on November 21, dragged by selling from equities by Foreign Portfolio Investors (FPIs) and strong dollar index.

According to Bloomberg data, Indian rupee ended at 84.5013 against the US Dollar, as against 84.4137 close on the previous trading session.

“A strong dollar continues to create a depreciating bias for currencies globally and is likely to sustain FPI outflows from Indian markets in the near term. However, interventions by the RBI, supported by India’s healthy foreign exchange reserves, should help keep rupee volatility in check,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

Indian rupee has been under pressure since last few weeks mainly due to dollar demand by FPIs and importers. Also, higher interest rates in the US on the treasury notes are also prompting FPIs to move their money back home in search of better return, which is also putting pressure on the local currency.

FPIs have sold equities worth Rs 94,017 crore in October and Rs 27,859 crore so far in November, as per NSDL data. Similarly, in the debt segment, they have sold Rs 4,406 crore in October and Rs 1,095 crore so far in November.

Further, a strong dollar index is also putting pressure on the rupee. The dollar index, which tracks the performance of the greenback against a basket of 10 leading global currencies, was trading at 106.701 as of 05:24 PM.

“The most important factor is that macro data is indicating the economy is slowing while inflation is higher than the RBI mandate. The foreign funds outflows equity and debt weighing on the rupee,” Dilip Parmar, a foreign exchange analyst at HDFC Securities.

Currency experts said that the intervention by the RBI has helped rupee from sharp depreciation. The RBI has always communicated that they don’t have any target level for rupee and intervenes in the market when need arises.

“The Reserve Bank does not target a level or band of the exchange rate. The forex interventions are carried out to ensure an orderly movement of the exchange rate and to curb undue volatility, anchor market expectations and ensure overall financial stability,” RBI Governor Shaktikanta Das said at CNBCTV18 Global Leadership Summit on November 14.