The Indian rupee or INR reached a historic low as global stock markets plummeted and concerns about the US economy intensified.
Rupee fell to a new low of 83.82 against the US dollar, trading at 83.8125 by 11:20 am, a decline of approximately 0.1 per cent from its previous close of 83.75 on Friday.
The drop was mirrored by losses in the Indian stock markets, with the benchmark BSE Sensex and Nifty 50 indices both falling around 3 per cent.
The global stock sell-off followed a disappointing US jobs report from Friday, which revealed an unexpected increase in the unemployment rate for July. This has raised concerns about the economic outlook.
Investors have shifted away from risky assets, fearing that the Federal Reserve’s decision to delay interest rate cuts could drive the US economy into a recession. The Fed’s move is seen as part of its broader strategy to control inflation.
In response, the Reserve Bank of India (RBI) intervened to stabilize the rupee. State-run banks were reportedly seen selling dollars intermittently, likely on the RBI’s behalf.
Meanwhile, the US dollar index dropped by 0.3 per cent to 102.85, with most Asian currencies appreciating between 0.3 per cent and 2.2 per cent.
US bond yields also saw a sharp decline. The 10-year Treasury yield fell by 8 basis points to 3.71 per cent, its lowest level since July 2023. This drop reflects growing expectations that the Federal Reserve may soon implement more significant rate cuts.
DBS Bank noted that markets are increasingly concerned about a potential economic slowdown. While some analysts anticipate substantial rate cuts, DBS Bank suggests that a 50 basis point cut would be adequate for the time being.
