Rupee Reaches Record Low of 85.87 Against the US Dollar Amidst Rising Crude Prices

The rupee has continued to struggle for the second day in a row, now closing 13 paise lower at a record low of 85.87 against the US dollar. This decline reflects ongoing pressure from increasing crude oil prices, a strengthening dollar, and lackluster performance in the equity markets.

On January 8, the rupee started the day at 85.82 in the interbank foreign exchange market. Throughout the day, it experienced an intra-day low of 85.89 before settling at its current value. In comparison, the previous close was at 85.74, marking a total loss of six paise.

Experts in the foreign exchange market have highlighted multiple factors contributing to the rupee's decline. Prolonged outflows of foreign funds and investor uncertainties following the government's adjustment of economic growth forecasts have created a more cautious atmosphere. Recently, the National Statistics Office (NSO) projected the GDP growth for the fiscal year 2024-25 at a low of 6.4%, which is the lowest estimation in four years. This revision is largely attributed to weak performance indicators in both manufacturing and services sectors.

Another significant influence on the rupee's depreciation is the rising strength of the US dollar. The dollar index, which assesses the performance of the dollar against a group of six major currencies, gained strength of 0.35%, reaching a value of 108.76. Market analysts also noted that the yield on 10-year US Treasury bonds has increased to 4.67%, suggesting expectations that the Federal Reserve may postpone rate cuts.

Adding to the concerns, global crude oil prices also surged, with Brent crude climbing 0.9% to trade at about $77.74 per barrel. This spike in energy prices poses additional challenges for India, as the country is a significant importer of crude oil.

On the domestic front, the equity markets have provided limited support. The BSE Sensex fell by 50.62 points, finishing at 78,148.49, while the Nifty saw a decrease of 18.95 points to settle at 23,688.95. Foreign institutional investors (FIIs) have been net sellers in the capital market, selling off Rs 1,491.46 crore on Tuesday.

This ongoing trend of a weakening rupee indicates a pressing need for policy adjustments to stabilize the currency amidst these global challenges. Analysts are closely monitoring upcoming data and policy decisions that could impact the future direction of the rupee. The decline of the rupee by 13 paise to 85.87 signifies a second consecutive record low, driven by the persistent pressures of higher crude prices and a strong dollar.

rupee, currency, oil