The rupee fell below 84 to a dollar level for the first time on Friday (October 11, 2024), pressured by concerns over the recent jump in oil prices and the exodus of foreign money from the equity market.

The rupee dropped to a low of 84.0525 per U.S. dollar and was last quoted at 84.05. The currency's decline past the 84 handle is significant as the Reserve Bank of India (RBI) had been defending that level.

The local currency had recovered to near 83.50 little over two weeks ago but its near-term outlook has worsened as the Middle East conflict has pushed up oil prices, foreigners have been pulling money out of equities and as hopes of another large U.S. rate cut have diminished.

Overseas investors have turned heavy sellers of Indian equities over the last nine sessions. Brent crude oil prices are up more than 10% in October so far.

RBI interventions

Repeated interventions by the RBI over the last two months had helped the rupee hold above the key level of 84 per dollar. The RBI on Monday informally instructed banks to avoid heavy bets against the rupee.

Meanwhile, the U.S. Federal Reserve will, in all probability, not cut the key policy rate by 50 basis points in November. In fact, the U.S. central bank may possibly skip the rate cut altogether.

That is quite a change from a month ago, when investors were debating whether it would be 50-basis-point or a 25-basis-point cut.

Going ahead, the rupee could see some more pressure but the RBI may "only allow marginal depreciation to make sure the rupee acts as a stable currency," VRC Reddy, treasury head at Karur Vysya Bank, said.