The rupee depreciated to a new intra-day low of 84.11 against the US dollar on Thursday, on the back of outflows from domestic equities and caution ahead of the results of the US presidential elections, said dealers.

       Market participants said the Reserve Bank of India (RBI) intervened in the foreign exchange market through dollar sales, which prevented the rupee from falling further.

       The local currency settled at 84.09 per dollar on Thursday, compared to 84.08 against the greenback on Wednesday.

       “The rupee depreciated due to outflows, and foreign banks have been buying dollars,” said a dealer at a state-owned bank. “The RBI is protecting the 84.09 per dollar level,” he added.

       The greenback has been strengthening globally as the likelihood of a Donald Trump victory increases. Trump’s inclination towards tariffs and higher borrowing has pushed US yields upward, leading to continuous capital outflows from other markets.

       The dollar strengthened over the week due to rising US yields, the “Trump trade,” and a weakening yen. The yen’s depreciation was partly driven by Japan’s recent elections, where no party secured a majority, leaving the country in political uncertainty despite the ruling LDP winning the most seats.

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       However, the yen rebounded slightly to 152.47 after reaching a low of 153.80. High US yields continue to exert pressure on the yen and other Asian currencies, although the CNH showed some resilience, buoyed by a better-than-expected Manufacturing PMI above 50 for the first time in six months.

       “Foreign portfolio investors continued to sell, and the Indian rupee fell to a new low, but the RBI continued to sell dollars to keep the rupee afloat at the time of closing. The rupee is expected to remain in the range of 84.00 to 84.20 next week as the RBI may continue to absorb the outflows by providing dollars,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

       Market volatility is anticipated with the upcoming Non-Farm Payrolls (NFP) report, US presidential election, and the Federal Open Market Committee meeting. RBI braces for US election impact

       The Reserve Bank of India (RBI) is well-equipped to deal with a potential sudden outflow of foreign funds and any steep fall in the rupee if Republican candidate Donald Trump wins next week’s US presidential election, two sources familiar with the bank's thinking said.The RBI would be able to tap its large foreign exchange reserves to defend the domestic currency in the event of global market volatility and an outflow of foreign funds, the sources said. They spoke on condition of anonymity because of the sensitivity of the matter. The RBI did not reply to an email requesting comment. Reuters

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