The Indian Rupee only saw a slight depreciation in October, outperforming other global currencies facing sharp declines, according to a Bank of Baroda report. The report attributes the rupee's stability to India’s strategic market positioning and the robust dollar, with geopolitical and inflation factors likely to shape future trends.
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In October, the Indian Rupee saw only a marginal depreciation of 0.3 percent, according to a recent report from Bank of Baroda, which compared this slight fall to the severe declines suffered by other global currencies. According to ANI, the report noted that while the rupee dropped to a lifetime low of 84.09 per dollar, this fall was relatively modest against the U.S. dollar's robust 3.2 percent increase over the month. The rupee’s trading range during October stayed between 83.82 and 84.09 per dollar.
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The Bank of Baroda report, as per ANI, highlighted the resilience of the rupee, even as major global currencies faced a "bloodbath." According to the report, "INR depreciated by 0.3 per cent in Oct'24 (0.1 per cent appreciation in Sep'24) and even fell to its lifetime low of 84.09/USD. However, this decline was only marginal, when compared with bloodbath witnessed in other major currencies."
The report also cited the strong performance of the U.S. dollar, attributing its appreciation largely to rising uncertainties surrounding the upcoming U.S. presidential election and a reduced likelihood of interest rate cuts by the Federal Reserve. These factors contributed to a challenging environment for other currencies. According to ANI, the New Zealand dollar, Brazilian real, Japanese yen, Australian dollar, and Thai baht all recorded significant drops. For instance, Japan’s yen touched a three-month low, pressured by political uncertainty within the country.
The report specifically noted, “Currencies which suffered the most were the New Zealand dollar, Brazilian real, Japanese yen, Australian dollar, and Thai baht. Apart from strengthening USD, JPY touched its 3-month low, dented by domestic political uncertainty.”
India's financial markets also experienced outflows from foreign portfolio investors (FPIs), driven by a sharp decline in stock indices. According to the report cited by ANI, outflows were seen in the debt segment as well, due to a narrowing interest rate spread between the U.S. and Indian 10-year bonds. This shift made Indian debt less appealing to foreign investors, reducing the inflow of funds in this segment.
Looking forward, the report suggested that the rupee may continue to face pressure, although its movement is expected to remain within a range. The report anticipated that the rupee will likely stay between 83.9 and 84.2 per dollar over the next fortnight. It further stated, "We expect pressure on INR to remain, but the movement will be range bound. Geo-political developments (US elections, tensions in the Middle East) and domestic inflation trajectory will be closely watched events."
As per ANI, the report concluded that geopolitical factors, including the U.S. elections, ongoing Middle East tensions, and domestic inflation rates, will play a critical role in shaping the rupee’s performance in the coming period. These factors are expected to influence investor sentiment and contribute to fluctuations in the currency's value.
(With inputs from ANI)
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