The Indian Rupee fell to a historical low on Monday, dragged down by persistent demand for US dollars from foreign banks, possibly for their custody clients. As of press time, the Rupee's exchange rate against the US dollar plummeted to a historical low of 84.0725 Rupees per US dollar, slightly above the 84.07 historical low touched last Friday.

Supported by regular interventions from the Reserve Bank of India (RBI), the Indian currency fell below the 84 level after hovering near that level for over two months.

The Rupee continues to face pressure this month due to ongoing outflows from the domestic stock market, with foreign investors withdrawing approximately $8 billion over the past ten trading days.

Advertisement

Traders indicated that on Monday, other Asian currencies weakened due to disappointment with China's stimulus plan, also putting pressure on the Rupee.

Most Asian currencies fell by 0.1% to 0.3%, while the US Dollar Index was at 103, hovering near a two-month high.

A foreign exchange bank trader stated that local private and state-owned banks sold US dollars, while large foreign banks dominated the bidding for US dollars.

The trader said that the US dollar to Rupee exchange rate might "linger within the range of 83.95-84.20 in the near term, and if the trend is rapid, it will still be sold on the rise."

Amit Pabari, Managing Director of the foreign exchange consulting firm CR Forex, stated that the Reserve Bank of India's protection of the Rupee, coupled with a possible slowdown in outflows from the stock market, could provide some relief to the Rupee and help it rise above 84.

Traders will also closely monitor Brent crude oil prices. On Monday, Brent crude oil prices fell to $78 per barrel, but have risen nearly 9% so far in October due to concerns that an expansion of conflict in the Middle East could disrupt oil supplies.

Meanwhile, Federal Reserve Governor Waller is scheduled to speak later today and may provide clues about the future direction of US policy interest rates.