Rupee hits record low of 84.6075; GDP concerns and outflows weigh on currency

Rupee hit a record low on Monday, trading at 84.6075 per U.S. dollar, amid concerns over a sluggish economy. The currency dropped past its previous all-time low of 84.5075, driven by weaker-than-expected GDP growth and pressure from a strengthening dollar. By 9:45 a.m. IST, the rupee was at 84.6025, down 0.1%. The Reserve Bank of India (RBI) likely intervened to curb further losses, with state-run banks reportedly selling dollars.

Economic slowdown adds to rupee's woes

India’s GDP growth fell to a seven-quarter low in the third quarter, sparking worries that the RBI might be under pressure to cut rates. Such a move could compound the rupee's challenges, already strained by persistent outflows from domestic equities and a stronger dollar. Foreign investors net sold about $2.5 billion in local stocks in November, following $11 billion in outflows during October. The weak economic data could further escalate outflows, exacerbating the rupee's depreciation.

RBI intervention and foreign exchange reserves

Traders have noted routine interventions by the RBI to support the rupee, but these have taken a toll on India’s foreign exchange reserves, which fell to a five-month low of $656.6 billion as of November 22. The reserves have dropped by $47 billion over the past seven weeks, raising concerns about the currency’s ability to stabilize in the face of rising global pressures.

Broader regional currency decline

The rupee’s struggles are not isolated. Most regional currencies also weakened against the dollar, with declines between 0.2% and 0.6%. This broader trend was partly driven by U.S. President-elect Donald Trump’s remarks regarding the future of global currencies and potential tariffs on nations backing alternative currencies.

As the rupee faces mounting pressures, eyes are on the upcoming RBI policy meeting, where potential dissent among committee members could further impact the currency’s trajectory.