He pointed out that the rupee’s decline is in line with global trends. “If you look at it from portfolio flows point of view and really not meaningful money coming in the fixed income, India continues to face some headwinds, and that’s exactly the reason why we are declining in addition to the fact that the global trend is of the dollar is also very strong.”
Read Here | Rupee gears towards fresh low of 86 per dollar amid broad-based dollar bids
The dollar index has risen from 103-104 levels to 108-109 and until Trump assume office, the market sentiment will likely keep the dollar strong.
On January 6 (Monday), the rupee weakened to 85.84 against the US dollar, inching past its previous record low of 85.8075 hit in the last week of December.
Also Read: How China’s currency move triggered sell off in Indian equities
Vaidya pointed out that during Trump’s previous presidency, the dollar index first rose nearly 8% just before he assumed office and subsequently fell by 15%. Tariff discussions during his first term began later in the year. However, this time, the tariff talks are happening upfront, creating uncertainty about the dollar’s movement.
Vaidya suggests that market participants will likely adopt a wait-and-see approach until policy outcomes under the Trump presidency become clear.
He also expects fresh allocations to India, typically seen in the first quarter of the calendar year, to be delayed as global fund managers seek greater clarity.
Also Read | A weaker rupee is not necessarily a bad thing
