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Indian rupee hits all-time low against UAE dirham

Forex traders said investors are awaiting cues from the Reserve Bank of India's monetary policy outcome

Published: Tue 5 Dec 2023, 9:37 AM

Updated: Tue 5 Dec 2023, 9:43 AM

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  • PTI, Reuters

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The rupee edged 3 paise lower to hit its all-time low of 22.727 against the UAE dirham (83.41 against the US dollar) in early trade on Tuesday, tracking higher demand for the American currency from importers.

Forex traders said investors are awaiting cues from the Reserve Bank of India's monetary policy outcome.

The Monetary Policy Committee of the central bank will begin its bi-monthly review meeting on Wednesday and announce the decision on Friday.

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The rupee had fallen to its lifetime low of 83.42 against the US dollar on November 10.

The 10-year US Treasury yield rose 6 basis points in New York to 4.28 per cent and last quoted slightly lower in Asia. The dollar index was steady at 103.6 after having risen to its highest level in a week overnight.

While there were no clear triggers for the move higher, analysts reckon that it was a partial reversal of sharp drops seen over the last 3 weeks as investors wagered on the US Federal Reserve cutting interest rates in 2024.

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Fed futures are now pricing in slightly over 100 basis points of rate cuts in 2024, beginning most likely from March or May.

The rupee may see "another session with a narrow range," as traders remain shy of pushing the currency lower due to expectations that the Reserve Bank of India (RBI) will likely intervene to defend the rupee.

Asian currencies were mostly lower with the Korean won, down 0.5 per cent, leading losses.

The rupee is expected see some volatility this week due to a series of U.S. economic data and RBI's monetary policy decision, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.

Investors will keep a keen eye on a crucial US labour market report on Friday, which could offer cues on how well placed the market's expectations on the Fed's policy rate trajectory are.

The RBI will deliver its monetary policy decision on Friday and is widely expected to hold rates steady.

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