From 85 To 86/US$ In Just 16 Days, Why Has The Rupee Fallen And What Now

The Indian Rupee hit a new low of 86.63 per US Dollar on Tuesday after crossing the 86-level on Monday. The plunge was set off by stronger-than-expected US jobs data which spurred concerns over potential delays in interest rate cuts by the Federal Reserve. State-run banks were spotted offering dollars, most likely on behalf of the RBI, while foreign banks' dollar offers also helped limit the rupee's decline, traders said. The currency logged its steepest single-day fall in nearly two years on Monday as the dollar scaled an over two-year high on fading bets of U.S. interest rate cuts this year after a blowout jobs report. “The trajectory of the INR decline has been steeper since Sanjay Malhotra took charge as RBI governor (INR down 2.1% since he began on Dec 9), raising speculation that the RBI has loosened its grip on the INR,” Societe Generale said in a note.