The Indian rupee touched a new all-time low of 84.92 against the US dollar in early trade on December 17, impacted by rising foreign fund outflows, a growing trade deficit, and an increase in gold imports. Analysts suggest the rupee will remain under pressure.
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The Indian rupee declined by 1 paisa to reach a new all-time low of 84.92 against the US dollar in early trade on Tuesday, pressured by foreign fund outflows and a sluggish performance in domestic equities. Forex traders suggest that the rupee is likely to remain under pressure due to strong dollar demand from importers and foreign banks.
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At the interbank foreign exchange market, the rupee opened at 84.89 against the greenback, and then fell further to 84.92, marking a 1 paisa drop from its previous close. On Monday, the rupee had depreciated by 11 paise, closing at a historic low of 84.91 against the US dollar.
"The Indian rupee is expected to open at its lowest point, influenced by a record trade deficit in November, primarily due to an increase in gold imports," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP. He added that the opening would depend on where the Reserve Bank of India (RBI) steps in to support the rupee, although the trend indicated weakness. Bhansali forecasted a daily range of 84.75 to 84.00, with a close watch on RBI interventions.
On the domestic economic front, India's exports in November saw a year-on-year contraction of 4.85 percent, totalling USD 32.11 billion. Meanwhile, the trade deficit surged to an all-time high of USD 37.84 billion, largely due to a record increase in gold imports. The commerce ministry reported that gold imports in November reached USD 14.86 billion, a fourfold rise compared to the same period last year. This spike in gold imports was driven by festival and wedding demand, with gold imports standing at USD 3.44 billion in November 2023.
Meanwhile, the dollar index, which measures the US currency against a basket of six major currencies, was trading marginally lower by 0.02 percent at 106.83. Brent crude, the global oil benchmark, also fell by 0.12 percent to USD 73.82 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex was down by 326.76 points, or 0.40 percent, at 81,421.81, while the Nifty was lower by 107.50 points, or 0.44 percent, at 24,560.75. Foreign Institutional Investors (FIIs) had offloaded Rs 278.70 crore in the capital markets on a net basis on Monday, as per exchange data.
As per PTI reports, analysts anticipate that the rupee's continued weakness could further compound the challenges facing the Indian economy, particularly with escalating import costs and growing trade deficits. The RBI's actions in the coming days will likely play a pivotal role in stabilising the rupee
(With inputs from PTI)
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