The Indian rupee tumbled to an all-time low against the UAE dirham on Thursday, driven by intensified foreign outflows, a strengthening US dollar, and global market volatility. The rupee sank to 23.0047 against the UAE dirham (84.4275 against the US dollar) during early trade, surpassing its previous record low of 23.0027. By 9 am UAE time, the currency showed marginal recovery, trading at 23.0020.
RBI Intervention and Stock Market Pressures
Efforts by the Reserve Bank of India (RBI) to curb the rupee’s depreciation were evident, with state-run banks offering strong dollar sales to stabilize the currency. Despite this intervention, the rupee’s struggles were compounded by sharp declines in Indian equity markets.
The benchmark BSE Sensex and Nifty 50 dropped nearly 0.7% each, weighed down by steep losses in Adani Group stocks. The conglomerate’s flagship firm, Adani Enterprises, plummeted 20%, while Adani Green Energy shed 18%. The nosedive followed reports of its billionaire chairman facing allegations of bribery and fraud in a New York indictment, intensifying investor concerns and triggering widespread sell-offs.
Global Dollar Strength and Fed Stance
The rupee’s weakness was exacerbated by the US dollar’s rebound after a three-day losing streak. The dollar index climbed to 106.5, reflecting a 0.4% gain on Wednesday, as hawkish signals from the US Federal Reserve dampened hopes for swift rate cuts.
Fed Governor Michelle Bowman remarked that inflation remains above target, expressing discomfort with easing interest rates under current conditions. Market odds for a December Fed rate cut dropped sharply from 82% to 52%, adding pressure on emerging market currencies like the rupee.
Geopolitical Tensions Add to Uncertainty
The ongoing Ukraine-Russia conflict further fueled demand for safe-haven assets like the dollar, amplifying the rupee’s struggles. Heightened military engagements and increased international involvement in the war have raised geopolitical risks, keeping global markets on edge.
DBS Bank noted, “Markets need to monitor the dangerous escalation in the Ukraine-Russia war, now driven by increased military engagements from both sides, strategic policy shifts, and heightened international involvement.”
A Bleak Outlook
The Indian rupee’s record low reflects a confluence of domestic challenges and global uncertainties. With foreign outflows, equity market disruptions, and a resilient dollar in play, the rupee remains vulnerable. Market participants will closely watch the RBI’s next steps, global monetary policy cues, and geopolitical developments for signs of stabilization.
