On December 12, the Indian rupee reached an all-time low of 84.88 to the U.S. dollar, marking a 0.04% decline. The currency faced significant pressure from heightened dollar demand in the non-deliverable forwards (NDF) market and from local importers, including oil companies. Despite the drop, the Reserve Bank of India (RBI) intervened to prevent further depreciation by directing state-run banks to offer dollars, helping to stabilize the rupee.
The weakened rupee is attributed to a combination of factors, including a stronger dollar and a general increase in demand for foreign currency. Additionally, the growing possibility of a weaker yuan in China, as the country contemplates measures to manage trade risks under a new U.S. administration, is adding pressure on Asian currencies. The offshore Chinese yuan saw a slight recovery after hitting a low the previous day, but the broader regional currency trends remain mixed.
Meanwhile, the U.S. dollar remains resilient, with the dollar index steady at 106.5. Investor expectations of a potential rate cut by the Federal Reserve have been priced in, but the outlook suggests a shallower series of cuts in 2025. This is likely to maintain support for the dollar, which continues to impact emerging market currencies like the rupee.