Rupee Reaches Record Low Amid Rising Crude Prices and Strengthening Dollar

The rupee continued its downward trend for the second consecutive day, closing 13 paise lower at an all-time low of 85.87 against the US dollar on January 8. This decline comes as a result of ongoing pressure from rising crude oil prices, a strong dollar, and lackluster performance in the equity markets.

At the start of the day in the interbank foreign exchange market, the rupee opened at 85.82 but fell to an intra-day low of 85.89 before finally settling at 85.87. On the previous trading day, the currency closed at 85.74, indicating a loss of six paise.

Forex analysts attribute the rupee's decline to several factors, including persistent foreign fund outflows and cautious investor sentiment followed by the government's downward adjustment of economic growth forecasts. The National Statistics Office (NSO) recently projected a GDP growth rate of 6.4% for the 2024-25 period, marking a four-year low and pointing to sluggish growth in both the manufacturing and services sectors.

The dollar index, which indicates the dollar's strength against a basket of six major currencies, rose by 0.35% to reach 108.76. This increase is complemented by elevated yields on 10-year US Treasury bonds, which currently stand at 4.67%, suggesting that expectations for a delay in Federal Reserve interest rate cuts are impacting the market.

Additionally, Brent crude, a global benchmark for oil prices, saw a rise of 0.9%, trading at $77.74 per barrel, further heightening concerns about rising import costs for India.

Domestically, the equity markets showed little respite. The BSE Sensex dropped by 50.62 points to close at 78,148.49, while the Nifty index fell by 18.95 points, settling at 23,688.95. Furthermore, foreign institutional investors continued to be net sellers, offloading ₹1,491.46 crore in the capital markets on Tuesday.

The rupee's ongoing weakness highlights the pressing need for policy adjustments to stabilize the currency amidst global challenges. Market participants are keenly observing upcoming data releases and policy decisions to better understand the future direction of the rupee.

Rupee, Dollar, Crude