Rupee in a Nose Dive: India's Currency Under Pressure

The Indian stock market faced a decline in the rupee on Thursday, which closed near its historic low. The trigger was increased foreign portfolio outflows and the end-of-month demand from importers for US dollars. Fortunately, the central bank was able to limit the losses through interventions. The rupee ended the trading day at a rate of 84.4850 against the dollar, slightly lower than the previous trade at 84.4525. Just last week, the rupee had reached its low point at 84.5075. Meanwhile, the significant Indian stock indices BSE Sensex and Nifty 50 suffered losses of about 1.5 percent each, weighed down by declines in heavyweight IT companies. Foreign banks remained cautious, while state banks were mostly present in the market on behalf of the Reserve Bank of India to offset potential losses. The central bank has recently intervened more actively in the market to stabilize the rupee at the crucial support level of 84.50. Internationally, the dollar index recovered to 106.3 after recording the largest daily decline since August on Wednesday. A strong euro, influenced by optimistic statements from a member of the European Central Bank and month-end rebalancing flows, likely weighed on the dollar, explained ING Bank. In the meantime, investors have increasingly hedged against Asian emerging market currencies, including the rupee, concerned about the policy moves of the upcoming US administration. All eyes are now on the release of Indian GDP data for the July to September quarter on Friday. These figures will give investors a clearer insight into the nation's economic pace, which has also contributed to foreign outflows from local stocks.