Indian rupee slipped to a fresh life-time low of 85.68 (as on 1PM IST) on Friday – posting the biggest fall in over 24 months. This was accompanied by strength in the USD after minutes from the Bank of Japan’s recent policy meeting showed members cautious around raising rates amid ongoing geopolitical uncertainty. In addition, the South Korean Won was over 15y low on worsening domestic political tensions. INR has depreciated rapidly this month, with pace of RBI intervention said to be less aggressive. This, along with already tight liquidity conditions puts RBI in a tough spot, with near term easing in policy rates less likely. Against the USD, the INR has depreciated around 2.8% CYTD – this is less than most emerging market currencies on account of continued RBI intervention, impact of which has been realized in domestic liquidity conditions as well.
