The Indian rupee dropped to an all-time low of 85.06 against the US dollar, driven by a hawkish US Federal Reserve outlook, a rising dollar, and foreign fund outflows.
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The Indian rupee dropped 12 paise to a record low of 85.06 against the US dollar in early trade on Thursday. The decline comes in the wake of a hawkish stance from the US Federal Reserve, which has spurred a broad rally in the dollar.
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Forex traders indicated that the US Federal Reserve’s adjustment of its projections for 2025, signalling a more cautious monetary policy, is putting pressure on emerging market currencies, including the Indian rupee. The rupee opened weakly at the interbank foreign exchange market and swiftly breached the key 85.00 mark, further sliding to its all-time low of 85.06 against the greenback. This marked a 12 paise fall from its previous close, driven by strong demand for the dollar from importers, foreign fund outflows, and a lacklustre trend in domestic equities, which dampened investor sentiment.
On Wednesday, the rupee had already slipped 3 paise, closing at another all-time low of 84.94 against the US dollar. The ongoing pressure on the rupee was attributed to a strengthening US dollar, which surged to a two-year high of 108.04, coupled with a rise in US 10-year bond yields to 4.51 per cent.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, commented that despite a 25 basis point rate cut by the US Federal Reserve, its hawkish outlook had kept the dollar firm. The Fed indicated that it might take another one or two years to bring inflation down to 2 per cent, with further rate cuts of 50 basis points expected in 2025 and another 50 basis points in 2026.
AS PER PTI, Bhansali noted that the broad sell-off across equities, commodities, and bonds had propelled the dollar, and the rupee may face a slow and steady depreciation going forward. While the Reserve Bank of India (RBI) is expected to defend key levels, it may not alter the broader trend, he added.
In international markets, the dollar index, which tracks the greenback’s performance against a basket of six currencies, was up by 0.01 per cent, trading at 108.03. Meanwhile, Brent crude, the global oil benchmark, fell 0.42 per cent to USD 73.08 per barrel in futures trade, influenced by the surging dollar and a more cautious Fed stance.
On the domestic front, the equity market also felt the pressure. The BSE Sensex was trading down by 910.95 points, or 1.14 per cent, at 79,271.25, while the Nifty had dropped by 281.15 points, or 1.16 per cent, to 23,917.70. Additionally, Foreign Institutional Investors (FIIs) sold off Rs 1,316.81 crore in the capital markets on a net basis, as per exchange data.
The rupee’s decline highlights the growing challenges in the currency market, driven by global and domestic factors that continue to weigh heavily on investor confidence.
(With inputs from PTI)
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