New Delhi [India], November 5 : The Indian Rupee depreciated marginally in October by 0.3 per cent compared to the bloodbath witnessed in other major currencies, highlighted a report by Bank of Baroda.
The report also noted that while the rupee dipped to its lifetime low of 84.09 per dollar, this was still a modest fall against the U.S. dollar's significant 3.2 per cent appreciation over the month. The rupee's trading range during October was between 83.82 and 84.09 per dollar.
It said "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 highlighted that the U.S. dollar strengthened sharply, largely driven by rising uncertainties around the upcoming U.S. presidential election, along with a reduced likelihood of interest rate cuts by the Federal Reserve.
In this environment, several currencies were hit hard. The New Zealand dollar, Brazilian real, Japanese yen, Australian dollar, and Thai baht all registered significant declines. Japan's yen, for instance, dropped to a three-month low, affected by political uncertainty within the country.
It said "currencies which suffered the most were- 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"
The report highlighted that, India's markets saw equity outflows from foreign portfolio investors (FPIs) due to a sharp dip in the stock indices. Debt segment outflows also occurred, influenced by a narrowing interest rate spread between the U.S. and Indian 10-year bonds, which made Indian debt less attractive to foreign investors.
Looking ahead, the report expects continued pressure on the rupee, with its movement anticipated to stay within a range of 83.9 to 84.2 per dollar in the coming fortnight.
The report said "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."
It suggests that geopolitical factors, particularly developments in the U.S. elections and ongoing tensions in the Middle East, along with domestic inflation trends, will be critical in shaping the rupee's path in the near future.
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