Rupee hits record low
In the morning trading session on December 11, the Indian Rupee fell to 84.86 against the USD in the early morning, lower than the old record of 84.8575 set the previous day. As of 10:00 a.m. (Indian time), the Rupee stopped at 84.8525.
According to many traders, state-owned banks were seen selling dollars, most likely on behalf of the Reserve Bank of India (RBI) to prevent the local currency from depreciating further.
Pressure from the non-spot foreign exchange market (NDF)
“The demand for dollars in the NDF market is very strong, putting pressure on the rupee,” said a trader at a foreign bank, who expects the RBI to continue its intervention, limiting the intraday decline to around 5-7 paise.
Pressure from the NDF also prevented the Rupee from taking advantage of the recovery in most Asian currencies. Although the USD Index remained around 106.3 and most other Asian currencies rose slightly, the Rupee still lost ground.
Impact of interest rate cut expectations and slowing growth
The rupee fell 0.4% against the dollar in December, underperforming most regional peers, largely due to concerns about slowing economic growth and expectations of domestic interest rate cuts.
While the RBI kept interest rates unchanged at its last meeting, the appointment of a new Governor has raised expectations of a possible rate cut next year, putting downward pressure on the rupee.
On the other hand, investors are also paying special attention to US inflation data due out later in the day, as well as the trade policy of the Trump administration, including the possibility of imposing tariffs, which could impact assets in emerging markets.
Rupee Trend Forecast
“We expect USD/INR volatility to increase. However, we do not expect the USD strength to persist through 2025,” Neelkanth Mishra, chief economist at Axis Bank, said in a note. The bank expects the rupee to weaken to 85.50 by the end of March 2025.
