Indian Rupee Hits Record Low Amid Market Outflows

Indian Rupee Hits Record Low: On Monday, November 4, the Indian rupee reached a historic low, closing at 84.1150 against the U.S. dollar, after briefly touching 84.1225 earlier in the session. This slide was driven largely by continuous outflows from Indian stock markets, even though the dollar itself showed some weakness against regional currencies ahead of the U.S. presidential elections.

Stock Market Pressure

Indian stock indices, the BSE Sensex and Nifty 50, also fell by over 1% during the day. Both indices are down approximately 8% from record highs reached in late September 2024, as foreign investors have been withdrawing funds due to underwhelming corporate earnings.

RBI Intervention

The Reserve Bank of India (RBI) stepped in on Monday, intervening to prevent a sharper decline of the rupee. Central bank officials suggest they are ready to handle potential market volatility, especially if the U.S. election outcome adds further pressure. Increased U.S. bond yields and capital outflows have put pressure on the rupee, with the RBI reportedly prepared to mitigate any impact of an unpredictable election result, particularly if there is a Republican victory.

U.S. Election Impact on the Dollar

The dollar index dropped slightly by 0.2% to 103.7, as Asian currencies gained strength. With the U.S. election in focus, markets are weighing the potential outcomes: a Republican “clean sweep” could bolster the dollar, while a Democratic win could dampen it. However, market analysts warn that results might take days to finalize, potentially adding to financial market uncertainty.

Global Market Response

The offshore Chinese yuan climbed to a three-week high at 7.08, benefiting from the dollar’s relative weakness. As global markets await the U.S. election results, analysts expect ongoing volatility, with regional currencies reacting based on shifts in investor sentiment and the election’s impact on the dollar.

Also read: Indian Stock Market Sees Major Selloff on November 4 : Top reasons

SUMMARY

On November 4, the Indian rupee fell to an all-time low, closing at 84.1150 against the U.S. dollar. The decline was influenced by ongoing outflows from Indian stocks, which caused local markets to drop, with indices like the BSE Sensex and Nifty 50 down over 1%.

The Reserve Bank of India (RBI) intervened to prevent a sharper fall in the rupee, preparing for increased market volatility ahead of the U.S. presidential elections. As the dollar weakened, other Asian currencies strengthened, with the offshore Chinese yuan reaching a three-week high.

Market analysts predict uncertainty surrounding the election results could lead to fluctuations in the currency markets, with potential impacts on the dollar's value depending on the election outcome. Overall, the Indian currency and stock markets are feeling the pressure from both domestic and international factors, particularly as foreign investors withdraw funds due to lackluster earnings reports.