The Indian rupee was trading close to its all-time low on Wednesday, caught between the weakness in local equities and dollar sales by state-run banks. By 9.15am UAE time, the rupee stood at 22.998 against the UAE dirham (84.4050 against the US dollar), almost unchanged from its previous close of 22.995. The currency had hit a record low of 23 against the UAE dirham on Tuesday.
Most Asian currencies saw gains, with the Chinese yuan rising 0.1 percent, supported by stronger-than-expected official guidance from the Chinese central bank. The dollar index was just below the 106 mark after reaching an over six-month high, driven by an increase in US bond yields as investors anticipated US President-elect Donald Trump's policies of lower taxes and trade tariffs.
The rupee has been hitting record lows for the past five trading sessions, influenced by the rally in the dollar index and continuous outflows from local equities. India's equity markets have experienced significant foreign portfolio outflows due to high valuation concerns, declining corporate earnings, and portfolio rebalancing efforts, according to DBS Bank.
Foreign investors have net sold approximately $3 billion of Indian stocks in November so far, following the previous month's $11 billion outflows. Indian equity indexes have dropped over 9 percent since their peak in late September. Despite the rupee's sustained pressure for more than a month, routine interventions by the central bank have facilitated a gradual decline and kept volatility in check, according to a senior trader at a foreign bank.
The Indian currency has fallen 0.4 percent so far in November, outperforming most regional peers. Investors are now awaiting US consumer inflation data later in the day to assess the future direction of the Federal Reserve's policy rates.
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