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Indian Rupee Hits Record Low Against USD and AED

Indian Rupee Strengthens by 4 Paise to 82.87 Against US Dollar in Early Trade

The Indian rupee faced a 3-paise decline, reaching a historic low of 22.727 against the UAE dirham (83.41 against the U.S. dollar) in early Tuesday trade, propelled by heightened demand for the U.S. currency from importers.

Anticipation Builds for RBI’s Monetary Policy Decision:

Forex traders are closely watching the Reserve Bank of India (RBI) as anticipation builds for the outcome of its bi-monthly review meeting, scheduled to commence on Wednesday, with the decision announcement expected on Friday.

The rupee had previously touched its lowest point of 83.42 against the U.S. dollar on November 10. Global economic indicators include a 6-basis point rise in the 10-year U.S. 

Treasury yield was 4.28%, with the dollar index maintaining stability at 103.6 after reaching its week-high overnight.

Speculation on Reversal of Recent Trends:

Analysts speculate that recent market movements, marked by a 3-week decline, indicate a partial reversal. 

This shift is seen as investors reconsider their positions, possibly in response to speculation about the U.S. Federal Reserve cutting interest rates in 2024.

Federal Reserve Futures Pricing and Rupee Outlook:

Federal Reserve futures are now priced at slightly over 100 basis points of rate cuts in 2024, with expectations of implementation beginning in March or May. 

Traders anticipate the rupee will maintain a narrow range as they exercise caution, anticipating potential RBI intervention to safeguard the currency.

Asian currencies, including the Korean won, experienced mostly lower values, with a 0.5% decline leading to losses. 

Analysts, such as Dilip Parmar from HDFC Securities, predict volatility in the rupee this week, driven by a combination of U.S. economic data and the upcoming RBI monetary policy decision.

Key Economic Reports and RBI’s Expected Course:

Investors are particularly focused on the crucial U.S. labor market report scheduled for Friday, providing insights into the market’s expectations regarding the Fed’s policy rate trajectory. 

The RBI’s monetary policy decision, anticipated to maintain steady rates, is poised to influence market sentiments throughout the week.

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