On December 20, 2024, emerging-market central banks are taking significant measures to counteract the strengthening U.S. dollar, which has driven their currencies to multi-year lows. The Bangko Sentral ng Pilipinas is closely monitoring the decline of the peso and has increased its interventions in the currency market, as stated by Governor Eli Remolona. Brazil's central bank has reportedly spent nearly $14 billion in the past week to bolster the real, while Bank Indonesia has committed to a robust defense of the rupiah to enhance market confidence.
In India, the rupee is expected to open near its all-time low, trading at approximately 85.06-85.08 to the U.S. dollar. This follows the release of strong U.S. economic data, which has reinforced expectations that the Federal Reserve will proceed cautiously with interest rate cuts in the coming year. The dollar index has reached a two-year peak, and the 10-year U.S. yield hit nearly 4.60%, its highest level in over six months.
Market analysts note that the U.S. economic indicators, including a faster-than-expected GDP growth and a decline in jobless claims, have prompted investors to favor the dollar, further impacting emerging market currencies. As concerns mount over the potential for prolonged higher U.S. interest rates, emerging market central banks are compelled to act to stabilize their currencies.
In addition, traders are shifting their focus within the Indian market as the rupee remains under pressure. Despite the weak currency, sectors such as pharmaceuticals are gaining preference over information technology, which traditionally benefits from currency depreciation.