Rupee hits new low of 86.31 against dollar, second day of decline The Indian rupee fell 27 paise to a new all time low of 86.31 against the US dollar in early trade on Monday. This is the second day of decline for the currency as a strong dollar and global uncertainty weighed on forex markets.
Forex traders said the rupee’s slide was due to rising crude oil prices, foreign fund outflows and sell off in domestic equities. The dollar remained strong as US job growth was stronger than expected which pushed up the benchmark Treasury yields and lowered expectations of aggressive rate cuts by the Fed.
Rupee opens at 86.12, falls to 86.31 in early trade. Down 27 paise.
Factors Behind the Rupee’s Decline
- Oil Prices and Inflation: Brent crude oil prices rose by 1.44%, reaching USD 80.91 per barrel, intensifying inflationary pressures on the Indian economy.
- Weak Domestic Markets: The BSE Sensex plunged by 550.49 points (0.71%), closing at 76,828.42, while the Nifty fell 182.45 points (0.78%) to end at 23,249.05.
- FII Sell-off: Foreign institutional investors (FIIs) net sold Rs 2,254.68 crore on Friday, further weakening market sentiment.
- Decline in Forex Reserves: India’s forex reserves dropped by USD 5.693 billion to USD 634.585 billion for the week ending January 3, according to the Reserve Bank of India.
Global Trends Impacting the Rupee
The US dollar index which is against 6 major currencies rose 0.22% to 109.72, a 2 year high. 10 year US treasury yield remained high at 4.76% as markets expect slower rate cuts from the Fed.
Despite all this industrial production (IIP) data was a silver lining, IIP growth accelerated to 5.2% YoY in Nov 2024 driven by festive demand and recovery in manufacturing sector.
Rupee will remain under pressure as markets will continue to be volatile, oil prices and foreign inflows will be key.
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Source: Moneycontrol
News Desk
