Indian rupee nears record low despite RBI hike, governor says markets can be irrational
MUMBAI: The Indian rupee fell to a five-month low and neared a record low on Wednesday despite an interest rate hike and signals about further monetary tightening, with traders saying the policy was not hawkish enough to support the Asian currency. The Reserve Bank of India raised the policy repo rate by 25 basis points to 5.5%, marking the first rise in nearly four years, and signalled more…
The Indian rupee slipped to a five-month low and neared a record low on Wednesday, despite the Reserve Bank of India (RBI) raising interest rates by 25 basis points to 5.5%. This was the first increase in nearly four years and a sign that the central bank intended to tighten monetary policy further. Traders expressed surprise that the market did not react more sharply, suggesting the rupee might be behaving irrationally in the current low-inflow environment.
RBI Governor Sanjay Malhotra described short-term financial market behavior as "irrational", stating that only in the long run can the correct value be determined. Analysts forecast the rupee may remain near record lows for the next three to six months, citing factors such as foreign portfolio outflows, high oil prices, and rising global bond yields, all of which are contributing to a deteriorating external backdrop. The rupee is currently the second-worst performing currency in Asia this year.
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