On Monday, the Indian rupee fell to a historic low against the U.S. dollar, impacted by surging U.S. Treasury yields that reached their highest level since July. The rupee dropped to 84.0850 per dollar, slipping just beyond the prior record of 84.0825, set last week. The currency’s weakness mirrors a broader decline across Asian currencies, pressured by the strengthened U.S. dollar and rising U.S. yields.
The surge in U.S. yields is being driven by robust U.S. economic data and increasing market expectations that Donald Trump might emerge victorious in the upcoming presidential election. These factors have bolstered the U.S. dollar, with the dollar index surpassing 104.50 on Monday.
Reserve Bank of India (RBI) Intervention Stabilizes Rupee Amid Volatile Markets
In response to the rupee’s slide, the Reserve Bank of India (RBI) stepped in, likely selling dollars through public sector banks to temper the currency’s decline, as it has done consistently over recent sessions. The RBI’s intervention helped contain the rupee’s losses, with market observers noting that without these support measures, the rupee would have experienced a sharper drop.
The RBI’s efforts have kept volatility in the rupee exceptionally low. Data from LSEG highlighted that last week, the rupee traded in its narrowest weekly range—just three paisa—in at least a decade.
Narrow Range Trading Amid RBI’s Control
“The rupee’s price action in the spot market appears heavily controlled by the RBI’s comfort level,” stated a trader from a private bank. “Even if the rupee briefly dips to new lows, it’s expected that the currency will be nudged back within this narrow range. This has resulted in a subdued market.”
The ongoing intervention by the RBI is seen as a stabilizing measure to limit extreme fluctuations in the currency as external pressures mount. As U.S. yields continue to influence global markets, the RBI’s stance will likely be a key factor in guiding the rupee’s trajectory in the coming weeks.
