Indian rupee slips to record low, logs worst monthly fall in over 3 years

MUMBAI: The Indian rupee slipped to its record low in the closing minutes of trading on Friday, capping its worst month since September 2022, as persistent foreign outflows and firm corporate dollar demand kept the currency under strain.

The Indian rupee fell 2.3% in January and hit a record low of 91.9875 per dollar on Friday before ending at 91.9825, modestly weaker on the day.

Dollar-selling intervention by the Reserve Bank of India helped keep the Indian rupee above 92 per dollar, though traders and analysts said staggered depreciation could continue unless foreign inflows rebound.

Foreign investors sold about $4 billion of Indian equities in January, adding to nearly $19 billion of outflows last year. Corporate hedging demand has also weighed on the currency.

The focus now turns to India’s federal government budget proposal due on February 1. Economists say the country faces the difficult task of restoring short-and long-term investor confidence, as uncertainty over New Delhi’s trade talks with Washington has unsettled financial markets and hurt the Indian rupee.

Goldman Sachs expects the government to consolidate its fiscal deficit to 4.1-4.3% of GDP. “The government is likely to lean towards the upper end of the range to retain space to support affected sectors if the US trade uncertainty persists beyond Q1,” analysts at the firm said in a note.

Fed pick awaited

Elsewhere, global markets are keenly awaiting U.S. President Donald Trump’s announcement of his pick to replace Federal Reserve Chair Jerome, expected later on Friday.

Bloomberg News later reported the White House is preparing for Trump to nominate Warsh, citing people familiar with the matter.

“Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction,” analysts at ING said in a note.