The Chinese yuan fell to its lowest against the dollar since December on Wednesday, after industrial output, retail sales and property investment data showed China’s post-Covid recovery stumbling.
And the yuan’s troubles saw the Indian rupee hit a more-than-six-week low against the US dollar, in line with a decline in other Asian currencies.
The rupee hit 82.4425 against the US dollar, its lowest since April 3, during the session, before recovering to close up 0.21% at 82.38.
That was after the yuan fell to 7.02 against the dollar, as growing geopolitical tensions also took a toll. The offshore yuan traded beyond 7 to the dollar for the first time this year while the onshore yuan briefly fell past 7 to a dollar before recovering.
The weak economic print from China has weighed on Asian currencies, said Dilip Parmar, research analyst at HDFC Securities.
But Parmar doesn’t expect the Reserve Bank of India to intervene at the current levels as other Asian currencies have started depreciating and the dollar index is strengthening.
The RBI’s recent interventions have helped in shoring up the country’s forex reserves to $596 billion.
Domestic economic data points like easing inflation and improved external currencies have mostly come in support of the local currency. However, analysts don’t expect much appreciation in the rupee.
“Even in the face of improved external balances, we expect the rupee to underperform Asian peers and only outperform in bouts of global risk-aversion, keeping volatility in the currency low,” Goldman Sachs said in a note.
“We believe appreciation pressures on the rupee will likely be capped since we expect the RBI to lean against any inflows, and replenish forex reserves,” Goldman economists said.
- Reuters with additional editing by Sean O’Meara