The Indian rupee dropped to a new record low of 83.88 against the US dollar, influenced by global economic concerns and the unwinding of the yen carry trade. The previous record was slightly higher at 83.845 per dollar.
Market volatility, spurred by fears of a US recession and changes in global equity markets, drove the rupee down. The possibility of slipping below 84 to the dollar looms, as indicated by non-deliverable forwards.
The Reserve Bank of India might intervene in various currency markets to stabilise the rupee. Such actions could provide essential support amidst the ongoing financial turbulence.
Foreign Portfolio Investors (FPIs) have withdrawn over $1 billion from Indian markets, adding pressure to the currency. This large outflow coincided with increased volatility in regional currencies.
The yen carry trade’s unwinding, a significant factor in the rupee’s decline, was triggered by the Bank of Japan’s recent policy changes. These included a rate hike and a reduction in government bond purchases, influencing global currency dynamics.
