The Indian rupee recently plummeted to a record low of 87.487 per USD before making a slight recovery. This marks a significant drop of 40 paisa compared to its previous closing rate of 87.07. Despite the weaker dollar index at 107.6, the rupee faced heavy selling pressure, making it the weakest currency among its Asian counterparts.
The primary reason behind this sharp decline is market speculation that the Reserve Bank of India (RBI) might reduce interest rates on February 7. Traders and analysts suggest that the currency's decline was intensified by widespread stop-loss triggers, which further weakened the rupee.
According to Anil Bhansali, head of treasury at Finrex Treasury Advisors, major foreign banks were active dollar buyers during the day. Once the rupee broke the 87.30 per USD threshold, automated stop-loss mechanisms caused a chain reaction, adding to the selling momentum.
The rupee’s slide to 87.50 levels caused concern among importers, who rushed to secure dollars, further increasing demand. The currency depreciation also coincided with a banking system deficit of Rs 38,215 crore. Meanwhile, the 10-year government bond yield remained at 6.66%, according to CCIL data.
Despite the sharp decline, RBI’s intervention in the forex market remained minimal. Most of the rupee’s depreciation occurred during the latter half of the trading session. Analysts suggest that the current exchange rate aligns with the real effective exchange rate (REER), bringing it closer to 105 levels.
Looking ahead, the RBI has scheduled a 56-day variable rate repo (VRR) auction on February 7, the same day as its monetary policy committee (MPC) meeting. This auction, with a notified amount of Rs 50,000 crore, is expected to be reversed on April 4. Traders and investors will closely watch these developments for potential signals on India’s interest rate outlook.
Stay updated on the latest forex trends and analysis about the Indian rupee record low. Visit our website for more insights: Fixio Markets.
he Indian rupee fell to a record low of 87.487 per USD, driven by interest rate cut expectations. Learn more about the impact.
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