Re breaches 85 mark

THE RUPEE ENDED at another all-time low of ₹85.08 to a dollar on Thursday, after touching a low of ₹85.09, as the US Federal Reserve's forecast of fewer rate cuts pushed the dollar index to a two-year high.

- DHARAMRAJ DHUTIA

The dollar index, which measures the greenback against a basket of six major currencies, was at 108.07 and the yield on the 10-year benchmark US Treasury note rose to 4.52%.

Market participants said that the intervention was nominal from the Reserve Bank of India (RBI) in the forex market, indicating that the central bank wants to slow down the depletion in the forex reserves.

In the last two months, India's foreign exchange reserve has reduced by over $46 billion.

As per RBI data, the forex reserves shrank to $654.857 billion as on December 6 from $704.885 billion on October 4.

"The hawkish tilt from the Fed sent traders heavily dialing back in easing expectations of rate cuts next year and in turn sparked a broad dollar rally, sending all currencies into a tailspin. This seems like an extended pause from the FOMC and no change in rates in the first half. The higher-for-longer syndrome seems to be back," said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors.

Meanwhile, Barclays Head of FX and EM Macro Strategy Asia, Mitul Kotecha, sees the rupee weakening further to 87 by the end of next year, despite temporary measures to arrest its decline. He, however, said the currency is expected to continue outperforming its Asian peers.