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Mumbai: The rupee slipped 1 paisa to an all-time low of 84.40 against the US dollar in early trade on Wednesday, as persistent <keyword id="20520117" type="General" weightage="20" keywordseo="foreign-fund-outflows" source="keywords">foreign fund outflows</keyword> and a muted trend in domestic equities weighed on the local unit. Forex traders said the USDINR pair has shown significant volatility in recent sessions, with the rupee inching closer to its all-time low of 84.40. This downward pressure is largely driven by global factors, particularly the Dollar Index's strengthening. At the interbank foreign exchange, the rupee opened at 84.40 against the greenback, registering a fall of 1 paisa over its previous close. On Tuesday, the rupee fell 1 paisa to a new lifetime low of 84.39 against the US dollar. "It appears that the rupee has established support around the current levels, with depreciation limited near 84.50," CR Forex Advisors MD Amit Pabari said. Pabari further added that the RBI stands tall as the depreciation in the rupee seems to be limited as the <keyword id="19899810" type="General" weightage="100" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) continues to sell the dollars to protect the sharp depreciation. "For the 5th consecutive week, India's forex reserves declined, possibly due to RBI selling the dollars. Currently, the forex reserves of India stand at USD 682 billion down from the recent all-time high of USD 704 billion," he said. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.04 per cent at 105.98. Brent crude, the global oil benchmark, rose 0.25 per cent to USD 72.07 per barrel in futures trade. On the domestic equity market front, Sensex was trading 210.66 points, or 0.27 per cent lower, to 78,464.52 points. The Nifty fell 100.45 points, or 0.42 per cent, to 23,783.00 points. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, as they offloaded shares worth Rs 3,024.31 crore, according to exchange data. On the macroeconomic front, retail inflation breached the Reserve Bank's upper tolerance level, soaring to a 14-month high of 6.21 per cent in October mainly on account of rising food prices. Inflation based on the consumer price index (CPI) was 5.49 per cent in September and 4.87 per cent in the year-ago month. India's industrial production expanded by 3.1 per cent in September after recording a contraction in the preceding month, as all three major segments -- mining, manufacturing, and power generation -- showed improvement. However, the growth in the Index of Industrial Production (IIP) during the month was lower than 6.4 per cent registered in September 2023.

Rupee falls 1 paisa to all-time low of 84.40 against US dollar in early trade

The rupee rose 2 paise to 84.40 against the US dollar in early trade on Tuesday amid a recovery in domestic equity markets and a weaker American currency against major Asian rivals. Forex traders said, however, sustained outflow of foreign funds and an upward movement in crude oil prices put pressure on the local unit and capped its sharp gain. At the interbank foreign exchange, the rupee opened at 84.39 and slipped further to 84.40 against the greenback, trading 2 paise higher from its previous close. On Monday, the rupee recovered from its lowest level of 84.46 to settle 4 paise higher at 84.42 against the US dollar. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.09 per cent at 106.10. Brent crude, the global oil benchmark, rose by 0.19 per cent to USD 73.44 per barrel in futures trade. On the domestic equity market front, Sensex was trading 271.42 points, or 0.35 per cent higher, at 77,610.43 points. The Nifty advanced 105.55 points, or 0.45 per cent, to 23,559.35 points. <keyword id="19932515" type="General" weightage="20" keywordseo="Foreign-Institutional-Investors" source="keywords">Foreign Institutional Investors</keyword> (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 1,403.40 crore, according to exchange data. SEE ALSO:<a href="https://www.businessinsider.in/tech/mobile/news/tata-to-buy-a-majority-stake-in-pegatrons-iphone-plant-in-india/articleshow/115414852.cms" target="_blank"></a> <a href="https://www.businessinsider.in/tech/mobile/news/tata-to-buy-a-majority-stake-in-pegatrons-iphone-plant-in-india/articleshow/115414852.cms" target="_blank">Tata to buy a majority stake in Pegatron's iPhone plant in India</a><a href="https://www.businessinsider.in/stock-market/webstories/ntpc-green-energy-ipo-gmp-risk-factors-and-all-you-need-to-know/slidelist/115403791.cms" target="_blank"></a> <a href="https://www.businessinsider.in/stock-market/webstories/ntpc-green-energy-ipo-gmp-risk-factors-and-all-you-need-to-know/slidelist/115403791.cms" target="_blank">NTPC Green Energy IPO – GMP, risk factors and all you need to know</a><a href="https://www.businessinsider.in/entertainment/news/jiostar-announces-plans-starting-at-15-heres-everything-you-need-to-know/articleshow/115326701.cms" target="_blank"></a> <a href="https://www.businessinsider.in/entertainment/news/jiostar-announces-plans-starting-at-15-heres-everything-you-need-to-know/articleshow/115326701.cms" target="_blank">JioStar announces plans starting at ₹15 – here’s everything you need to know</a>

Rupee rises 2 paise to 84.40 against US dollar in early trade

<ul class="summary-list"><li>Investors face diminishing returns from cash alternatives as interest rates decline.</li><li>Money market funds offered low-risk yields, but missed gains in the S&amp;P 500.</li></ul>Just a year ago, if the stock market got bumpy or felt risky, investors could shave a bit off their positions and park in cash-like <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/banking/what-is-a-money-market-account">money market funds</a> yielding slightly over 5%.Today, cash alternatives are yielding slightly less. Still, they remain near or above 4.5%, which is a tempting return in exchange for no risk. But as we head deeper into an <a target="_blank" class="" href="https://www.businessinsider.com/fed-cut-rates-inflation-powell-blackrock-ceo-larry-fink-2024-10#:~:text=The%20Federal%20Reserve%20will%20disappoint,a%20rise%20in%20global%20inflation.">interest-rate-cutting cycle</a>, the benefits of sitting on the sidelines will diminish, and investors will need to rethink their strategy.While the perk of a low-risk asset with a decent yield seems like a sweet deal, it actually did some investors a disservice, says Mark Malek, the CIO at Siebert. Specifically, those who didn't have liquidity needs but chose to sit in cash anyway missed out on a strong year for the S&amp;P 500."I'm going to say something controversial, which is that we weren't having as many of these conversations when money markets were almost zero," Malek said. "Clients had no other alternatives, so they were putting their money to work in the equity markets or in the best bonds they could find. Many people should have probably invested in equities and would've probably gotten great returns."The main advantage money markets give investors is quick access to their cash, followed by lower risk and then a decent yield. The former is harder to match. But the latter two can be found in <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/treasury-bonds">Treasuries, notes, and bonds</a>, Malek said. By sticking to shorter-term Treasuries, investors can still meet their liquidity needs."That's where the whole conversation changes because now you're saying, 'OK, we can get you into a three-month bill, but then you would want to hold that,'" Malek said, adding that he would never advise a client who needs liquidity to go further out and buy a two-year note. And anyway, the yield curve is inverted, meaning there's no term premium, with the best yields coming from the one-month out to the six-month Treasury.It's about gauging liquidity needs and then sticking to bills or looking for older notes that are months away from maturity, Malek said. The main challenge with going shorter term is the rollover risk, which happens when you're faced with less favorable yields once the current Treasury matures. For investors who don't have immediate cash needs, Malek advises a six-month bill at a 4.5% yield since he expects rates to be 75 basis points lower by then. If liquidity needs arise, investors may be able to sell for a profit if the Fed's cutting cycle is steeper than expected, he added.Investors with a bit more of a risk appetite who want to maintain a yield just over 5% should consider investment-grade corporate bonds, which are AAA to BB-rated, Malek said.<h2 id="ac89e755-a442-47d7-b00d-34e1f8eb6a94">Dollar alternatives</h2>While interest-rate cuts are part of the move away from cash, there are other factors that make the dollar, in general, a crummy place to be right now, says David Miller, the CIO at Catalyst Funds.Inflation remains present even if it's not as high as it was. The Federal deficit continues to balloon. And, the weaponization of the dollar against countries like Russia has made it less attractive globally, Miller noted.Based on these additional concerns, Miller says the closest alternative would then be <a target="_blank" class="" href="https://markets.businessinsider.com/news/commodities/gold-price-record-high-became-etf-interest-rates-trump-costco-2024-10">gold</a>, and big money is vying for it. Central bank demand for gold reached its highest in a decade in 2022 and 2023. Although it slowed in 2024, it was still up by 6% from a year ago in the second quarter, according to the World Gold Council.Investors may feel queasy about the asset as it hits peak prices near $2,800 per ounce. But you have to consider the value of the dollar against that backdrop, Miller noted. Simply put, the M2 money supply, which includes cash and cash alternatives, has skyrocketed since 2020 by over 36%, debasing the dollar.For investors looking for that gold alternative, Millers says they can <a target="_blank" class="" href="https://www.businessinsider.com/how-to-invest-in-gold-price-record-highs-safe-haven-2024-10">buy coins, bars, and even gold ETFs</a>.<a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/buy-bitcoin">Bitcoin</a> is another alternative that more risk-prone investors look to. As of Tuesday, it surpassed $71,000, hitting near its all-time highs as hedging demand grows. While it has similar liquidity to cash, it's much more speculative, Miller noted.

Cash is no longer king. Here are 3 alternatives investors are trading it for, according to chief money managers.

<ul class="summary-list"><li>The foreign exchange market remains quiet despite global geopolitical and economic shifts.</li><li>The yen carry trade unwind in August led to a temporary market pullback and recovery.</li></ul>The foreign exchange market has been eerily quiet since the yen <a target="_blank" class="" href="https://www.businessinsider.com/currency-markets-could-reshuffle-unexpectedly-fx-forex-trades-global-economy-2024-8">carry trade</a> unwind.The realized volatility in most currency pairings is incredibly low. But if you look at the backdrop of what's happening around the world, including geopolitical instability, interest-rate changes, and <a target="_blank" class="" href="https://www.businessinsider.com/9-elections-to-watch-2024-the-biggest-election-year-history-2024-1">election uncertainty</a>, <a target="_blank" class="" href="https://www.businessinsider.com/yen-carry-trade-next-unwind-forex-market-currencies-trading-fx-2024-8">FX should be going crazy</a> at this stage, says David Barrett, the CEO of EBC Financial Group, a multi-asset broker.The <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-forex">foreign exchange market</a> has three major participants, and none of them is making big moves now, he noted. The first is on the surface layer, where short-term traders are betting on currency shifts and yields, which have taken over more volume than historically. On the second layer, you have more speculative traders, mostly made up of hedge funds and trading firms. And on the third layer, you have bigger money, where the pension funds and government allocators sit.Short-term traders generally don't affect market direction as steeply. They are in-and-out traders. Much of the moves from the yen carry unwinding witnessed in August happened at this layer, Barrett said. The hedge funds or larger market makers tend to respond to flows that are coming through, making them neutrally positioned based on those flows.The last group, where the big money pension funds sit, trades foreign exchange for two main reasons: one, they allocate non-denominated currencies for their investments. Two, they hedge their currency exposure to remain neutral. They mainly readjust that hedge when currency rates move. And because we have not seen a huge amount of volatility in most pairs, they have been very quiet, he said.But the yen could once again shake up an otherwise boring currency market and more.In August, the US stock market saw a swift pullback (and recovery) after the Bank of Japan raised rates. Japan's near-zero <a target="_blank" class="" href="https://www.businessinsider.com/market-crash-japan-central-bank-boj-cools-interest-rate-hike-2024-8">interest rates </a>had made the yen a funding currency that was borrowed cheaply to invest in other assets where rates were higher — the so-called carry trade. When rates rose and the currency strengthened, the trade unwound.But what we've seen in the yen carry trade is only the beginning, Barrett said. We have flushed out the short-term positions. However, any significant move in the dollar, such as weakness due to interest rate cuts against a strengthening yen, would unravel deeper positions where pension funds sit.The big talking point in that trade is the Japanese pension fund, Barrett said. It has extensive exposure outside of Japan, and a strengthening yen is very problematic for it. Japan has the world's largest government pension fund with $1.6 trillion in assets, and a large amount of that is invested outside the country. The pension invests in foreign stocks, foreign bonds, and foreign commodities."Now, you may not think that's a yen carry trade, but it's absolutely the purest yen carry trade because all of that pension fund money started off as yen," Barrett said. "It's been sold, and it's been put into other investments abroad."The shift away from foreign asset interest has already begun. So far this year, Japanese investors bought $192 billion in Japanese government government bonds, the most in at least 14 years, according to<a target="_blank" href="https://www.bloomberg.com/news/articles/2024-10-01/japan-s-4-trillion-carry-trade-begins-to-slowly-unwind"> Bloomberg</a>. Meanwhile, they cut their foreign bond purchases by almost half, the article noted.It's hard to pinpoint an exact tipping point at which things could further unravel, Barrett noted, because positions are built on many layers. For example, hedge funds that are on the second layer that sold yen for the dollar and took positions in Big Tech, like Nvidia, are still in the money in terms of gains. Therefore, these positions may not need further shifts before they move, he noted.What's the impact of US elections on foreign exchange trades? There isn't one, he noted. This is because the race is too tight to predict an outcome at this point."So, what you tend to see at the moment is people that have existing risk that are wargaming for what happens if you get a Harris presidential victory or a Trump one," David said.The Harris trade is easier to maneuver because it's expected to be less volatile. There's a good chance that the same policies will remain in place over the first six to 12 months of her presidency. The market won't have many new adjustments to make, he noted.The potential volatility comes from the Trump trade due to tariff hikes, a fiscal boost, higher yields, and probably a stronger dollar that will benefit some sectors more than others, he noted."The trades that are being put on at the moment are probably more likely to be the longer-term guys that have ingrained exposure in their portfolio, and they're putting on some kind of hedge," Barrett said. "So most people that I talk to in the interbank market are telling me that the options market is busier than the spot market. The options market is something that gives people optionality to react rather than having to be heavily positioned."Since the market has generally been long the dollar due to higher rates, most of the options trades would be hedging against a dropping dollar by buying puts, which increase in value if the dollar declines, or doing straddles or strangles, which is when you buy calls and puts at the same or different strike prices. And because volatility in the price of FX optionality is still low, hedges are relatively cheap, he added.

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Rupee falls 1 paisa to all-time low of 84.40 against US dollar in early trade

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Rupee rises 2 paise to 84.40 against US dollar in early trade

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Cash is no longer king. Here are 3 alternatives investors are trading it for, according to chief money managers.

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As forex markets await political shocks, one tipping point could lead to a 'catastrophic trade' that unwinds markets

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