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19-12-2024
Bureau Report + Agencies
NEW DELHI/ MUMBAI: The Indian rupee hit its all-time low on Wednesday, pressured by strong dollar demand from importers and likely outflows from local equities, while intervention by the Reserve Bank of India curbed losses, traders said.
The rupee fell to 84.9550 against the US dollar before closing at 84.9525, down 0.07%.
Weakness in regional currencies ahead of the Federal Reserve’s policy decision due in US trading hours also hurt the rupee alongside speculative dollar bids amid a lingering bearish bias on the local unit.
Benchmark Indian equity indexes BSE Sensex, opens new tab and Nifty 50, opens new tab ended lower by about 0.6% each.
Worries over India’s growth outlook have kept the rupee under pressure, alongside a well-supported dollar following Donald Trump’s election victory.
The dollar index was last at 106.7, and has risen over 3% since the Nov. 5 election.
Despite the pressures, the rupee has fared better than most of its regional peers since then, on the back of routine interventions by the Reserve Bank of India.
The local unit is down 0.9%, while its peers have weakened between 1.8% and 4.4%. The RBI likely sold dollars and conducted dollar-rupee buy/sell swaps on Wednesday as well, as part of its measures to support the currency.
The central bank has complemented spot market intervention with dollar-rupee buy/sell swaps in recent sessions, likely intended to prevent the impact of spot dollar sales on headline foreign exchange reserves and INR liquidity, traders said.
Globally, investors were watching out for any changes to Fed policymakers’ projection of rate cuts in 2025 from the September forecast, with a 25 basis points reduction fully priced in for this meeting.
“Expectations for the final Fed meeting are well embedded: a hawkish 25bp cut to 4.25%-4.50%, meaning a possible pause in January and fewer cuts in 2025/26,” Societe Generale said in a note.
In September, US central bankers think they’ll need to lower interest rates to a range of 4.25%-4.50% by year-end, more than they anticipated in June, as inflation approaches their 2% goal and unemployment rises.
That’s according to the median of new economic projections published on Wednesday by the Federal Reserve at the end of its Sept. 17-18 meeting, at which it delivered part of that expected 100 basis-point reduction this year in the form of an initial half-of-a-percentage-point cut.
The Fed’s target range for its short-term borrowing benchmark is now 4.75%-5.00%, and the projections imply policymakers expect quarter-point rate cuts at each of the last two meetings this year, in November and December.
By the end of 2025, policymakers anticipate a policy rate of 3.4%, according to the median of their projections, implying an additional four quarter-of-a-percentage-point cuts next year. The policy rate was seen at 2.9% at the end of both 2026 and 2027, reflecting an arrival to what the median Fed policymaker now sees as a neutral rate.
In June, the last time the Fed released quarterly projections, the median US central banker anticipated just one quarter-point reduction in all of 2024. Since then, inflation eased from what had been unexpectedly strong readings early in the year.
At the same time, the unemployment rate, now 4.2%, is more than half a percentage point higher than it was when the Fed began its year-and-a-half-long rate-hike campaign in March of 2022. The Fed on Wednesday said it decided to cut rates in light of progress toward its inflation goal and with the risks to both its mandates now “roughly in balance.”
