Indian Rupee Hits Record Low, Weighed Down by Dollar Rally and Yuan Slump

The Indian rupee ended at a record low against the U.S. dollar on Friday, pressured by the decline in the Chinese yuan and marking its ninth consecutive week of losses due to the persistent strength of the greenback.

The rupee closed at 85.77 to the dollar, slightly lower than its previous close of 85.7525, reflecting a 0.2% decline for the week.

The fall of the Chinese yuan, which dropped below the key 7.3 level to a 14-month low against the dollar, exacerbated the rupee’s weakness. The yuan’s slump was driven by concerns over falling yields, expectations of rate cuts, and the looming threat of tariffs from the incoming Trump administration.

On Friday, the Chinese currency closed at 7.3093 against the dollar, down 0.14%, marking its weakest level since November 2023. This decline in the yuan added further downward pressure on other Asian currencies, which were broadly lower.

“A slide in the yuan aggravated the rupee’s troubles,” noted a trader at a private bank.

The Reserve Bank of India’s (RBI) likely dollar sales have prevented the rupee from falling below its previous record low of 85.8075, reached last week. Despite these interventions, the rupee has remained under pressure, largely due to the broader rally in the U.S. dollar.

The dollar index reached its highest level in over two years during New York trade on Thursday and is on track to register its best weekly performance in over a month. Investor expectations of fewer Federal Reserve rate cuts this year, coupled with the belief that the U.S. economy will continue to outperform its global counterparts, have kept the dollar in strong demand.

Looking ahead, market participants are closely watching the upcoming U.S. jobs report for December, due next Friday, along with U.S. inflation data set for release on January 15.

Analysts expect the rupee could reach the 86-per-dollar mark in the near term, with Jigar Trivedi, a senior analyst at Reliance Securities, advising investors to buy the dollar-rupee pair on any dips.

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