Rupee falls 14 paise to 84.23 against dollar.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six major currencies, was trading 1.64 percent higher at 105.11. This rise in the dollar’s value contributed to the rupee’s decline, as the strengthening of the U.S. dollar often leads to pressure on other currencies, including the Indian rupee. The rupee’s fall to an all-time low of 84.23 against the dollar reflects broader global economic trends, with the dollar benefiting from higher interest rates in the U.S. and global inflationary pressures, which continue to impact emerging market currencies like the rupee.
Mumbai: The Indian rupee fell by 14 paise to an all-time low of 84.23 against the US dollar in early trade on Wednesday. This decline was driven by a combination of persistent foreign fund outflows and the strengthening of the American currency in the global market. Forex traders noted that the ongoing US election, which has added to market volatility, was a significant factor in the rupee’s drop. However, they anticipate that the situation could stabilize once a clear winner emerges from the closely contested race.
The dollar’s strength also exerted downward pressure on the rupee. The dollar index, which measures the US dollar’s value against a basket of six major currencies, was trading 1.64 percent higher at 105.11. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, explained that the dollar index rose after early results from the US elections showed a lead for Donald Trump. Trump’s strong performance in the early election returns, along with a similar trend in the Senate and House races, contributed to the dollar’s gains in the global market.
In addition to the election results, there is also speculation that the US Federal Reserve will announce a rate cut in its meeting later this week, which has contributed to the heightened volatility in the financial markets. Further easing of up to 100 basis points is projected for 2025, which could have significant implications for global currency markets, including the rupee. This speculation is likely to continue influencing market sentiment until clearer signals are provided regarding US monetary policy.
At the interbank foreign exchange, the rupee opened at a record low of 84.23 against the US dollar, registering a 14-paise drop from the previous day’s close. On Tuesday, the rupee had settled 2 paise higher at 84.09 against the dollar. The rupee’s movements were closely watched by traders, as its fluctuations in response to the ongoing US election results could provide clues about future trends in the foreign exchange market.
Despite the rupee’s decline, other factors were providing some support to the Indian market. Brent crude, the global oil benchmark, was trading 0.98 percent lower at USD 74.79 per barrel in futures trade. A fall in crude oil prices typically benefits the Indian economy by reducing the import bill for oil, which is a major component of the country’s trade deficit.
“The rupee’s movement will largely depend on how the Reserve Bank of India (RBI) manages the situation,” said Bhansali. He noted that the central bank’s intervention will play a crucial role in determining how the rupee opens and moves through the day, depending on the ongoing election results and global economic factors. Bhansali suggested that the rupee could see a wide range of movement, with the potential to fluctuate between 84.00 and 84.35 during the trading session.
On the domestic equity front, Indian stocks were showing resilience despite the external challenges. The BSE Sensex advanced 390.93 points, or 0.49 percent, to close at 79,867.56 points. Similarly, the Nifty surged 135.60 points, or 0.56 percent, to settle at 24,348.90 points. The gains in the equity markets were supported by positive sentiment in response to corporate earnings and investor confidence, even as global market factors continued to weigh on investor sentiment.
However, foreign institutional investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth Rs 2,569.41 crore, according to data from the exchanges. This outflow of foreign capital added to the pressure on the rupee, as the demand for dollars increased to repatriate funds and cover foreign exchange positions. The outflows are part of a broader trend of capital flight from emerging markets amid global economic uncertainty and the ongoing US elections.
The continued volatility in the forex market reflects broader trends in global economic conditions, including shifting investor sentiment, fluctuating commodity prices, and uncertainties surrounding US monetary policy. The coming days are likely to see further movements in the rupee as election results become clearer and the market absorbs any potential policy announcements from the US Federal Reserve. For now, all eyes are on the developments in both domestic and international markets as traders look for signs of stabilization in the foreign exchange and equity markets.