Pressured by worries about the recent spike in oil prices and the flight of foreign capital from the domestic equity market, the Indian rupee dropped below 84 to the dollar for the first time on Friday.
As of 12.20 p.m. IST (10.50 a.m. UAE time), the rupee had fallen to 84.07 and was last quoted at 84.0425 (22.8998 vs the UAE dirham). Since the Reserve Bank of India had defended that level for over two months, the currency’s drop past the 84 handle is noteworthy.
A little more than two weeks ago, the currency had rebounded to about 83.50, but the Middle East crisis has driven up oil prices, foreign investors have been withdrawing funds from stocks, and expectations of another significant rate drop by the United States have waned, all of which have harmed the currency’s near-term prospects.
Over the past nine sessions, foreign investors have been aggressively selling Indian stocks, while Brent crude oil futures have risen more than 10% so far in October. Over the past two months, the RBI has often intervened to keep the rupee above the 84 level. In an unofficial directive on Monday, the RBI advised banks to refrain from placing large wagers against the rupee.
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