Strong dollar demand and outflows from local equities made the Indian rupee the second worst-performing Asian currency in August, after the Bangladeshi taka. It lost 0.2% of its value throughout the course of the month.
Throughout the month, only these two Asian currencies had a decrease in value relative to the US dollar. On Friday, the rupee’s value per dollar was Rs 83.86.
The rupee fell by 0.2% in August and is now trading at 83.87 against the dollar, near its all-time low of 83.97 against the dollar. This occurred in spite of the US dollar’s decline. An increase in importers’ demand for dollars and a slowdown in foreign exchange profits, particularly in the stock industry, were the key factors affecting the rupee. The rupee fell vs the dollar, in contrast to the majority of other world currencies that increased, according to Bank of Baroda economist Sonal Badhan.
The rupee has lost 0.6% of its value thus far in the current fiscal year. Because of the Reserve Bank of India’s prompt intervention, the rupee ranked third among Asian currencies against the US dollar in the most recent financial year (FY24), after the Singapore dollar and the Hong Kong dollar. During the year, the rupee lost 1.5% of its value, compared to 7.8% in FY23.
Furthermore, in 2023, the local currency was extremely stable in relation to the US dollar—the least volatile it has been in almost thirty years.
The value of the Indian rupee slightly decreased compared to the US dollar by 0.5%. When the Indian rupee increased by 0.4% in 1994, it was the last time it showed such stability.
Despite a weak US dollar, the rupee reached a record low in August 2024. As a result, market participants anticipate that the local currency would stay range-bound in the foreseeable future.
The recent addition of seven Indian stocks to the MSCI index and the increase in the adjustment factor for HDFC Bank, along with the downturn in crude oil prices, may encourage foreign institutional investment (FII) inflows into Indian equities and support the currency further.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, stated, “We continue with the stance that for now the RBI would not allow the rupee to cross 84 and would wait for Fed signals on the interest rate to move forward.”