The Indian rupee plunged to an all-time low on Friday, driven by maturing non-deliverable forwards and
currency futures that boosted dollar demand. The sharp decline triggered panic dollar buying by
importers, adding to the pressure.
The rupee weakened to a record low of 85.8075 against the U.S. dollar before the Reserve Bank of India
(RBI) intervened, helping it recover slightly to close at 85.5325, down 0.3% on the day. This marked its
steepest single-day fall since June 4, when the surprising outcome of India’s general elections roiled
markets. The currency also fell 0.3% for the week, marking its eighth consecutive weekly decline.
Concerns over India’s slowing growth and widening trade deficit, coupled with dollar strength driven by
the Federal Reserve’s hawkish outlook and U.S. President-elect Donald Trump’s policies, have weighed
heavily on the rupee, which has hit record lows for eight straight sessions.
Traders noted strong dollar bids linked to the expiry of December currency futures and maturing non-
deliverable forwards, which pushed the rupee down sharply. The central bank initially remained absent
during this period, further exacerbating the sell-off. However, the RBI “stepped in strongly” late in the
session, helping the rupee trim its losses, according to traders.
Adding to the rupee’s woes, the 40-currency real effective exchange rate (REER) climbed to a multi-year
high of 108.14 in November, signaling an overvaluation of about 8%, according to RBI data.
Meanwhile, the broader market saw the dollar index steady at 108.1, while most Asian currencies
weakened by 0.1% to 0.4%. China’s yuan also hovered near a 13-month low against the dollar, trading
just below the key 7.3 level amid thin year-end liquidity. The spot yuan opened at 7.2951 per dollar and
was last trading at 7.299, close to levels last seen in November 2023.
Looking ahead, analysts cite U.S. President-elect Trump’s tariff policies as a major uncertainty for the
yuan in 2024. During Trump’s first term, the yuan depreciated over 12% amid tit-for-tat tariff measures
from 2018 to 2020. Goldman Sachs notes that the most significant USD/CNY fluctuations tend to follow
tariff announcements rather than speculation.
Additionally, Chinese bond yields remain under pressure, with the 10-year government bond yield
dipping 1 basis point to 1.69% on Friday, reflecting subdued investor sentiment.
Technical Outlook – U.S. Dollar / Indian Rupee
The USDINR pair reached a high of 85.80 on Friday before settling at 85.53, up 0.30%. Since November 4,
2024, the pair has maintained an upward trajectory, gaining over 1.40%.
Weakness in Asian currencies and lingering concerns over “Trump trade” have continued to weigh on
sentiment. The pair is expected to remain fragile in the near term. However, after last month’s steep
rise, some retracement is likely amid potential RBI intervention.
On the downside, the pair could test the 85.32–85.12 range before resuming its upward move. On the
upside, significant resistance is seen at 85.48–85.68. Sustained trading above this range could pave the
way for a move toward 85.85 and beyond.
Until then, Happy Trading!
Commodity Samachar Securities
We Decode the Language of the Markets
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