In recent times, the Indian Rupee, the bedrock of South Asia’s economic powerhouse, has found itself caught in the tumultuous currents of a freefall, sending shockwaves through financial markets and sparking concerns about the stability of the broader BRICS coalition. Understanding the driving forces behind the Rupee’s decline becomes paramount as economic landscapes evolve and global dynamics shift.
Indian Rupee tanks against the dollar
The rupee (INR), the native currency of BRICS member India, fell to a new low versus the US dollar on Monday. The Indian rupee fell to 83.34 as the US dollar strengthened against all BRICS currencies this month. The rupee is constantly falling due to a number of factors, including domestic and international financial pressure.
Despite India’s growing economy, the INR’s poor performance in the currency market concerns the Modi administration.
The rupee has fallen as a result of top global banks and institutional retailers competing for the US dollar rather than the rupee. The action was most likely made on behalf of major banks’ institutional and custodial clients. As a result, the INR became “sticky in the 5-10 paisa zone near 83.30,” according to a report presented by Reuters.
The trend is not limited to the INR; Asian currencies performed poorly against the US dollar this quarter. The Chinese Yuan, South African Rand, and Argentina’s Peso, among others, plunged to new lows in the fourth quarter of 2023.
Asian currencies fell as follows: The Thai baht and Korean won plunged 0.6% and 0.5%, respectively.
Treasury yields in the United States climbed in Asia, with the 10-year yield rising to 4.47% and the 2-year yield rising to 4.94%.
Rupee Vs. Dollar market performance
The INR is forecast to hover between its support and resistance levels, with little movement in either direction. “Broadly, the rupee is likely to stay rangebound, but small depreciations can’t be ruled out,” said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
However, Nuvama Alternative & Quantitative Research warned that the Indian equity markets could soon see a $1.5 billion inflow. The inflows are related to the rebalancing of the MSCI index and will take effect on November 30, 2023.
After a $1.5 billion rebalancing in the equity market, the rupee may trade higher in December next month. As a result, BRICS member India’s only chance to exceed the US currency may be in December 2023.
The Indian Rupee (INR) is currently facing challenges, with forecasts indicating potential fluctuations in its value against the US Dollar (USD). As of now, the rupee is hovering near record lows, and there is an expectation of continued pressure due to factors such as crude oil prices and global economic conditions.
Ongoing factors such as crude oil prices and U.S. Federal Reserve decisions contribute to the pressure on the Indian Rupee, keeping it near a record low.
US Dolar market performance
The US Dollar (USD) is taking up where it left off on Friday with a minor fall lower, while statistics do not indicate to a recovery anytime soon.
After the US holidays, traders will return to the market in full force, with a rather heavy macroeconomic calendar for this week, including a delayed OPEC+ meeting in Dubai on Thursday, while COP28 will also begin on the same day in the same venue.
This week begins with some New Home Sales data on Monday. The focus will be on the last three days of the week, with the US Gross Domestic Product (GDP) on Wednesday. On Thursday, the market will be influenced by Jobless Claims and the Personal Consumption Expenditures Price Index (PCE) for October.
The Institute of Supply Management (ISM) is set to issue its Manufacturing Purchase Managers Index (PMI) for November at the end of this week, with a speech from US Federal Reserve Chairman Jerome Powell to round out the week.
