Rupee Hits Record Low Amid US Election Uncertainty, Strong Dollar

The Indian rupee hit a fresh record low on Wednesday in the face of a resurgent US dollar and uncertainty over the US presidential election results. The domestic unit had opened lower for the third consecutive session earlier today.

Rupee depreciated 15 paise in the day so far to 84.25 against the greenback. It had opened at 84.16, marking a fresh low compared to Tuesday’s close of 84.1075, and surpassing its previous all-time low of 84.1225 hit earlier this week.

The domestic currency fell in line with its Asian peers as the dollar continued to strengthen with expectations of former President Donald Trump returning to the White House.

The Japanese Yen fell the most by 1.2%, followed by a similar depreciation in the Malaysian Ringgit. China's offshore currency, the Singapore Dollar and Thailand's Bhat fell over 1% on Wednesday.

The dollar strengthened across the board as election updates showed Republican candidate Donald Trump leading over Democratic candidate Kamala Harris, spooking global markets. The ongoing uncertainty surrounding the US elections has exacerbated risk aversion among investors, causing capital outflows and a surge in demand for US dollars.

On Tuesday, the rupee closed flat at 84.109, after a volatile trading session that saw it open at 84.13, another historic low. Forex analysts had anticipated a continuation of the currency's decline as global factors, such as the US election and foreign portfolio investor outflows, continued to exert pressure on the currency. FPI outflows, especially from Indian equities, have triggered demand for dollars, as investors reposition portfolios amid election jitters.

The rupee’s troubles have been compounded by external factors, including a stronger US dollar and rising global crude oil prices, both of which are dampening the outlook for emerging market currencies. The rupee has struggled to maintain any recovery after briefly appreciating to 84.06 on Monday, and has yet to regain strength despite Reserve Bank of India interventions.

Indian rupee was set to open at 84.22, as Trump was projected to win the race to President while the Senate and House was set to be taken by Republicans. All will depend on RBI as to where it will allow rupee to open and how it would move depending on intraday election results. Wide range for rupee would be 84.00 to 84.35, said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.

Market expectations are that the rupee may trade within a narrow range of 84.0 to 84.35 in the short term, with analysts predicting continued volatility, as the US election results unfold and global economic pressures persist. As the US counts votes, the market remains jittery, and the rupee could see further weakening, unless there's a clearer picture emerging from the election and other external developments.