On October 7, the rupee fell 3 paise to close at 88.77 against the U.S. dollar. File
| Photo Credit: Reuters

Representational image.
| Photo Credit: PTI

The rupee dropped 12 paise to an all-time low of 85.06 against the US dollar in early trade on Thursday (December 19, 2024), as a hawkish tilt from the US Federal Reserve sparked a broad dollar rally.

Forex traders said the US Federal Reserve has adjusted its projections for 2025, signalling a more cautious monetary policy stance, pressuring emerging market currencies, including the Indian rupee.

At the interbank foreign exchange, the rupee opened on a weak note and breached the crucial 85.00 level against the greenback.

It fell further to an all-time low of 85.06 against the American currency, registering a fall of 12 paise over its previous close, as dollar demand from importers, foreign fund outflows and a muted trend in domestic equities further dented investor sentiments.

On Wednesday (December 18, 2024) the rupee dropped 3 paise to close at an all-time low of 84.94 against the US dollar.

Rupee under ‘severe’ pressure

The rupee was under severe pressure as the US dollar charged ahead on hawkish FED outlook and flirted with a two-year peak at 108.04, while US 10-year bond yield rose to 4.51 per cent, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The US FED cut rates by 25 basis points but was very hawkish in its approach as it said that it might take another year or two to get to 2 per cent on inflation. It expects cuts of 50 bps in 2025 and another 50 bps in 2026.

“A broad sell-off in equities, commodities, and bonds has kept the dollar well bid. We expect a slow and steady depreciation as the Reserve Bank of India (RBI) may protect key levels though may not change the direction,” Bhansali added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.01 per cent at 108.03.

Brent crude, the global oil benchmark, fell 0.42 per cent to USD 73.08 per barrel in futures trade, on a surging dollar and a hawkish FED after it signalled slower easing.

An employee counts U.S. dollar bills at a foreign exchange counter inside a bank in New Delhi. File photo
| Photo Credit: REUTERS

The rupee fell 5 paise to an all-time low of 84.37 against the US dollar in early trade on Friday (November 8, 2024), weighed down by persistent foreign fund outflows and a muted trend in domestic equities.

Forex traders said the US Federal Reserve’s recent decision to cut interest rates signals a shift in the global financial landscape. Moreover, with Donald Trump’s tax and trade policies influencing global markets, volatility could re-enter the rupee’s trajectory.

At the interbank foreign exchange, the rupee opened at 84.32 against the greenback, then it fell further to an all-time low of 84.37, registering a rise of 5 paise over its previous close.

On Thursday, the rupee slipped 1 paisa to close at a fresh lifetime low of 84.32 against the US dollar.

“The spotlight will now be on the Reserve Bank of India (RBI) and how effectively it navigates this shifting currency landscape. In such a dynamic environment, only those who adapt swiftly will thrive in the market ahead,” CR Forex Advisors Managing Director Amit Pabari said.

In its latest monetary policy announcement, the US Fed reduced its benchmark rate by 0.25 basis points to a target range of 4.5 per cent-4.75 per cent.

In its accompanying statement, the Fed adopted a neutral-to-dovish tone, acknowledging balanced risks in inflation and employment.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading marginally higher by 0.02 per cent at 104.53.

Brent crude, the global oil benchmark, fell 0.65 per cent to USD 75.14 per barrel in futures trade.

“In this dynamic environment, volatility in the USD/INR pair is expected, with the RBI likely maintaining a range between 83.80 and 84.50. If the dollar’s momentum stalls amid future Fed rate cuts and weakening investor confidence, the rupee could gradually strengthen toward the lower end of this range,” Pabari said.

On the domestic equity market front, Sensex declined 14.23 points, or 0.02 per cent, to 79,527.56 points. The Nifty fell 15.45 points, or 0.06 per cent, to 24,183.90 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 4,888.77 crore, according to exchange data.

The Indian rupee turned flat at 83.94 against the US dollar in early trade on Friday (August 16, 2024) amid concerns over elevated crude oil prices and the outflow of foreign capital from domestic equity markets.

However, a positive sentiment in the domestic as well as global equity markets and a weak American currency supported the rupee, forex traders said.

At the interbank foreign exchange, the rupee opened at 83.93 and slipped further to trade at its previous session’s closing level of 83.94 against the greenback.

On Wednesday (August 14, 2024) the rupee settled 3 paise higher at 83.94 against the US dollar. The forex markets were closed on Thursday on account of the Independence Day.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading marginally lower by 0.01 per cent at 102.80.

Brent crude, the global oil benchmark, declined 0.25 per cent to USD 80.84 per barrel.

On the domestic equity market front, Sensex surged 811.34 points, or 1.03 per cent, to 79,917.22 points. The broader Nifty also climbed 246.20 points, or 1.02 per cent, to 24,389.95 points.

Foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday, as they offloaded shares worth Rs 2,595.27 crore, according to exchange data.

On the domestic macroeconomic front, wholesale inflation fell to a 3-month low of 2.04 per cent in July on the decline in prices of food items, especially vegetables, government data released on Wednesday showed.

The latest government data released on Wednesday showed India’s exports contracted 1.2 per cent to USD 33.98 billion in July, while the trade deficit widened to USD 23.5 billion.

A forex dealer in Bombay looks at a graph of the Indian rupee.
| Photo Credit: Reuters

The rupee witnessed a range-bound trading against the US dollar in early trade on Thursday, September 21, 2023 weighed down by a negative trend in domestic equities and a strong American currency

Forex traders said the Indian rupee was weighed down by a rising dollar index, following hawkish comments from Federal Reserve officials.

At the interbank foreign exchange, the rupee opened at 83.16 against the dollar, registering a fall of 5 paise over its previous close. The domestic unit also touched 83.08 against the American currency in initial trade.

On Wednesday, the rupee staged a sharp rebound from its lifetime low levels and surged by 21 paise to close at 83.11 against the US dollar.

“After a hawkish FED, not ruling out one hike in 2023 due to sticky inflation and keeping interest rates fall in 2024 by a smaller than expected margin, the comments boded poorly for Asian markets given that it tightens monetary conditions and limits flow of foreign capital in the region,” said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

The FOMC also stressed that the long-term projections are inherently uncertain and subject to change as the financial atmosphere is highly dynamic and contains numerous potential risks that could influence future outcomes, Bhansali said.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.21 per cent to 105.55.

Brent crude futures, the global oil benchmark, declined 0.66 per cent to USD 92.91 per barrel.

In the domestic equity market, the 30-share BSE Sensex declined 306.96 points or 0.46 per cent to 66,493.88. The broader NSE Nifty fell 82.95 points or 0.42 per cent to 19,818.45.

Foreign Institutional Investors (FIIs) were net sellers in the capital market on Wednesday as they offloaded shares worth ₹3,110.69 crore, according to exchange data.