Islamabad, Dec 11: The Indian rupee fell to its lowest level ever on Tuesday, reaching 84.8575 against the U.S. dollar before closing slightly higher at 84.8525, marking a 0.1% decline. The market reacted to the appointment of Sanjay Malhotra, a seasoned bureaucrat, as the new Reserve Bank of India (RBI) governor. This development fueled speculation of rate cuts by the central bank next year.
Government bond yields dropped, and the 5-year overnight index swap rate—a key interest rate indicator—hit a 3-month low of 5.97% before recovering slightly. State-run banks, likely acting on behalf of the RBI, engaged in dollar sales to stabilize the rupee, according to traders.
Outgoing Governor Shaktikanta Das, known for his hawkish stance, leaves behind a potential dovish tilt in the monetary policy committee, especially as Deputy Governor Michael Patra’s term ends in January. Economists suggest Malhotra’s policies on liquidity, currency management, and macro-prudential measures will be closely monitored before the next rate meeting in February.
The transition occurs amidst global trade and tariff uncertainties, pressuring emerging market currencies. The rupee has fallen 0.9% since November, coinciding with Donald Trump’s U.S. presidential victory. Meanwhile, the dollar index rose 0.1% to 106.3, with most Asian currencies declining as markets await U.S. inflation data and an anticipated 25 basis point Federal Reserve rate cut at next week’s meeting.
