The Indian rupee plunged to an all-time low of 86.6475 against the US dollar on January 14, driven by strong dollar demand and maturing positions in the non-deliverable forwards (NDF) market. The rupee closed at 86.63, down from 86.5750 in the previous session, marking its sharpest decline in nearly two years.
State-run banks reportedly offered dollars, likely on behalf of the Reserve Bank of India (RBI), which intervened to limit the rupee's losses. The rupee's decline has accelerated since the appointment of RBI Governor Sanjay Malhotra in December, raising concerns about the central bank's approach to currency management.
As the dollar index cooled slightly to 109.5, the rupee's 1-month implied volatility surged to a 16-month high of 4%. Analysts note that the RBI aims to manage foreign exchange reserves judiciously to mitigate market volatility, particularly amid strong global economic headwinds.
Investors are now anticipating upcoming US inflation data, which could further influence currency markets.