The dollar index was up 0.2% at 109.9 while most Asian currencies weakened. Representational file image.
| Photo Credit: Reuters

The Reserve Bank of India (RBI) was likely selling dollars to support the rupee on Monday (January 12, 2025), after the currency slumped to its all-time low as the dollar surged on expectations that the Federal Reserve will not cut rates by much this year, four traders told Reuters.

The rupee was at 86.36 per U.S. dollar as of 10:15 a.m. IST after hitting its all-time low of 86.39 earlier in the day.

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State-run banks were spotted offering dollars, most likely on behalf of the Reserve Bank of India, traders said.

The RBI seems to be “letting it (USD/INR) move up till bids thin out a little and then stepping in to cap the rise,” a senior trader at a bank said.

The dollar index was up 0.2% at 109.9 while most Asian currencies weakened.

The dollar was boosted by robust U.S. jobs data, leading to expectations that the Federal Reserve will proceed cautiously with rate cuts this year.

Representational image.
| Photo Credit: PTI

The rupee dropped 12 paise to an all-time low of 85.06 against the US dollar in early trade on Thursday (December 19, 2024), as a hawkish tilt from the US Federal Reserve sparked a broad dollar rally.

Forex traders said the US Federal Reserve has adjusted its projections for 2025, signalling a more cautious monetary policy stance, pressuring emerging market currencies, including the Indian rupee.

At the interbank foreign exchange, the rupee opened on a weak note and breached the crucial 85.00 level against the greenback.

It fell further to an all-time low of 85.06 against the American currency, registering a fall of 12 paise over its previous close, as dollar demand from importers, foreign fund outflows and a muted trend in domestic equities further dented investor sentiments.

On Wednesday (December 18, 2024) the rupee dropped 3 paise to close at an all-time low of 84.94 against the US dollar.

Rupee under ‘severe’ pressure

The rupee was under severe pressure as the US dollar charged ahead on hawkish FED outlook and flirted with a two-year peak at 108.04, while US 10-year bond yield rose to 4.51 per cent, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The US FED cut rates by 25 basis points but was very hawkish in its approach as it said that it might take another year or two to get to 2 per cent on inflation. It expects cuts of 50 bps in 2025 and another 50 bps in 2026.

“A broad sell-off in equities, commodities, and bonds has kept the dollar well bid. We expect a slow and steady depreciation as the Reserve Bank of India (RBI) may protect key levels though may not change the direction,” Bhansali added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.01 per cent at 108.03.

Brent crude, the global oil benchmark, fell 0.42 per cent to USD 73.08 per barrel in futures trade, on a surging dollar and a hawkish FED after it signalled slower easing.