The Indian rupee fell to its lowest level ever on Tuesday, mainly because the US dollar got stronger and the Chinese yuan also dropped. The rupee reached a low of 84.7575 before it slightly recovered, closing the day at 84.6850. A trader from a government bank said that the rupee bounced back a little as demand for dollars decreased and the yuan stopped losing value.
Earlier in the day, the rupee was able to prevent bigger losses thanks to the Reserve Bank of India’s actions in the money market. The RBI sold dollars to help the rupee and made trades to balance out the dollars in the market.
Due to these actions, the prices for dollar-rupee futures went down significantly. The expected return on a one-year dollar investment also dropped below 2% for the first time since August. Worries about India’s slowing economy, a steady flow of money leaving the country, and the weakness of the yuan have kept pressure on the rupee. India’s GDP growth in September fell to the lowest level in a while, which means the RBI might cut interest rates sooner than we thought, while money leaving the stock market is expected to continue, weakening the rupee further.
After many years of stability, it seems like the Reserve Bank of India has loosened its grip on the rupee, according to analysts from ING Bank. The expected ups and downs of the rupee have increased, with the one-month forecast volatility reaching its highest point in six months at 3% on Tuesday. Lastly, the dollar index was slightly lower at 106.2 after rising 0.5% on Monday, while currencies from other Asian countries were mixed.
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