Indian Rupee Hits Record Low Amid Dollar Strength and Market Pressures

The Indian rupee weakened to an all-time low on Thursday, trading at 23.0047 against the UAE dirham (84.4275 against the US dollar) during early market hours. The decline comes amid foreign outflows from Indian stocks and a resurgence in the US dollar as expectations of aggressive rate cuts by the US Federal Reserve eased.

By 9 a.m. UAE time, the rupee had stabilized slightly at 23.0020, nearly flat on the day. Intervention by the Reserve Bank of India (RBI), with state-run banks selling dollars, helped curb the currency’s losses, according to traders.

Domestic Market Turmoil

Indian equity markets also faced a rough session, with benchmark indices BSE Sensex and Nifty 50 dropping about 0.7% each. The decline was led by sharp losses in Adani Group shares following the indictment of its chairman in New York over an alleged multibillion-dollar bribery and fraud scheme.

Adani Enterprises, the conglomerate’s flagship entity, saw its shares tumble 20%, while Adani Green dropped 18%. The sell-off in Adani Group stocks added to the market’s bearish sentiment, prompting foreign investors to pare their positions further.

Global Dollar Recovery

The rupee’s weakness was compounded by renewed strength in the US dollar. After a three-day losing streak, the dollar index rebounded to 106.5 on Wednesday, supported by a 0.4% gain.

Cautious comments from US Federal Reserve officials also dampened hopes for swift rate cuts. Fed Governor Michelle Bowman stated on Wednesday that cutting interest rates prematurely, with inflation still above target, would be unwise.

This shift in sentiment has significantly reduced the odds of a December rate cut by the Federal Reserve, with probabilities falling to 52% from 82% a week earlier, according to the CME FedWatch Tool.

Geopolitical Concerns

Adding to the rupee’s troubles, heightened geopolitical risks from the Ukraine-Russia conflict bolstered demand for the safe-haven US dollar. DBS Bank warned in a note that escalating military engagements and increased international involvement in the conflict pose additional risks to global markets.

Outlook

The Indian rupee faces continued pressure from both domestic and global factors. Persistent foreign outflows, volatile equity markets, and dollar strength are likely to keep the currency under strain.

Market participants will closely monitor the RBI’s interventions, US inflation data, and geopolitical developments for further cues. While the rupee has shown some resilience due to central bank actions, its near-term trajectory remains uncertain amid elevated global risks.