The rupee reached an all-time low on Friday as the dollar's post-US election surge gained momentum, while the ongoing withdrawal of foreign investors from domestic equities and bonds also put pressure on the local currency.

The rupee depreciated to Dh23.0238 (84.4975 per US dollar) against the UAE dirham in early trading on Friday, surpassing its previous record low of Dh23.0224 (84.4925) on Thursday. By 10.40 am IST, it stood at Dh23.02 (84.49), showing minimal change for the day.

The greenback's strength following Donald Trump's victory in the US elections, coupled with overseas investors withdrawing over $4 billion from local equities and debt, has negatively impacted the rupee this month.

The dollar has surged more than 3% since the November 5 US presidential election, driven by expectations that Trump's policies could boost inflation and limit future rate cuts by the Federal Reserve. The rally paused earlier in the week but resumed on Wednesday due to heightened geopolitical risks and cautious signals from Fed officials on rate cuts.

Meanwhile, the rupee has weakened nearly 0.5% so far in November, although routine interventions by the Reserve Bank of India (RBI), including on Friday, have mitigated the decline. Its Asian counterparts have experienced losses ranging from 0.9% to 2.2% this month.

"A strong dollar continues to exert a depreciating pressure on global currencies... However, RBI's interventions, backed by India's robust foreign exchange reserves, should help manage rupee volatility," said Rajani Sinha, chief economist at CareEdge Ratings.

State-run banks were observed offering dollars on behalf of the RBI, with traders noting particularly strong offers near the 84.50 level. At this juncture, "there is limited interest from interbank traders in selling dollars and very subdued inflows, so the central bank will likely remain active to smooth out sharp movements," a senior trader at a state-run bank commented.

While the RBI aims to ensure the market is "liquid and deep and functioning in an orderly manner," these interventions have resulted in the rupee being overvalued against the currencies of India's major trading partners. The rupee's 40-currency real effective exchange rate (REER), a measure of its competitiveness, indicates that the currency was overvalued by 7.21% at the end of October, according to RBI data.

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