News Indian Rupee Posts Worst Single-Day Drop in Nearly Two Months, Closes at 90.8650 Per DollarIndian Rupee Posts Worst Single-Day Drop in Nearly Two Months, Closes at 90.8650 Per Dollar
The Indian rupee suffered its worst single-day decline in nearly two months, falling 0.6% to close at 90.8650 per dollar amid elevated import demand and maturing NDF positions. RBI intervention through state-run banks helped limit losses, though the currency moved closer to its all-time low of 91.0750. India's December trade deficit stood at $25.04 billion, while analysts expect continued depreciation pressure without an India-US trade deal.
*this image is generated using AI for illustrative purposes only.
The Indian rupee posted its worst single-day performance in nearly two months on Friday, declining 0.6% to close at 90.8650 per dollar. The sharp fall brought the currency dangerously close to its all-time low of 91.0750 recorded in December, highlighting mounting pressure on the South Asian currency.
Key Market Movements
The rupee's decline was driven by multiple factors, with elevated dollar demand from importers and maturing positions in the non-deliverable forwards market creating significant downward pressure. The currency also weakened 0.7% on a weekly basis, reflecting sustained selling pressure.
| Metric | Value | Context |
|---|---|---|
| Closing Rate | 90.8650 per dollar | Worst drop since mid-November |
| Daily Decline | 0.6% | Steepest fall in nearly two months |
| Weekly Performance | -0.7% | Continued weakness |
| All-Time Low | 91.0750 | Recorded in December |
Central Bank Intervention
State-run banks conducted intermittent dollar sales throughout the trading session, most likely acting on behalf of the Reserve Bank of India. These interventions helped limit the currency's fall and prevented a more severe decline. Traders noted that while RBI's support measures provide near-term stability, they also drain rupee liquidity from the banking system, creating upward pressure on local borrowing costs.
Trade Data and Economic Backdrop
India's merchandise trade deficit for December reached $25.04 billion, according to data released on Thursday. Despite this deficit, the data showed resilience in exports to the United States, even in the face of steep tariffs. The local currency's weakness also pushed dollar-rupee forward premiums to three-week highs as importers rushed to lock in hedges while interbank traders maintained a paying bias.
Market Outlook and Analysis
Analysts at ANZ noted that depreciation pressure on the rupee is likely to persist, particularly in the absence of an India-US trade deal. They suggested that the optimal policy approach would be to tolerate a more flexible exchange rate, allowing liquidity to be boosted to levels sufficient to support domestic demand.
Global Context
Asian currencies remained largely rangebound during the session, while the dollar index hovered near a six-week high following upbeat US economic data. Markets have significantly reduced expectations for Federal Reserve rate cuts, with a 67% probability now assigned to the Fed maintaining rates in April, up from 37% a month ago. The odds of rate cuts in January and March stand at approximately 5% and 20%, respectively, according to the CME FedWatch tool.
15
