Rupee Hits All-Time Low Against US Dollar at 88.35 Amid Strong Dollar Index and Rising Crude Prices
The Indian rupee has hit a new record low, closing at 88.35 against the US dollar on Thursday, marking a decline of 24 paise. This drop is attributed to ongoing tariff tensions between India and the US, foreign fund outflows, and rising crude oil prices. Forex dealers noted that a stronger dollar ahead of upcoming US inflation data has added further pressure on the Indian currency, which has struggled to recover despite some signs of improvement.
Rupee’s Performance in the Forex Market
The rupee opened at 88.11 in the interbank foreign exchange market and reached an intraday low of 88.49 before settling at 88.35. This represents a significant decline from its previous close. On Wednesday, the currency had shown slight recovery, edging up 4 paise to 88.11. The previous record closing was 88.18, set on September 1. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, explained that the rupee is under pressure due to strong demand for dollars for imports, external tariff concerns, and market expectations surrounding US inflation data and Federal Reserve policy. He indicated that the dollar index is hovering around 98, while Brent crude prices have also increased, leading to heightened dollar demand.
Market Influences and Predictions
Analysts predict that the rupee will continue to face challenges in the near term. Bhansali mentioned that the rupee is expected to trade within a range of 88.25 to 88.75 on Friday, influenced by the dollar index, which rose by 0.22 percent to 97.99. Brent crude, a key global oil benchmark, was trading slightly lower at $67.32 per barrel. Anuj Choudhary, a research analyst at Mirae Asset ShareKhan, noted that the rupee is likely to maintain a negative bias due to the recovery of the US dollar index and ongoing foreign institutional investor (FII) outflows. He also highlighted that demand for dollars from importers and persistent tariff issues between India and the US could further pressure the rupee.
Equity Market Response
In the equity markets, the Sensex rose by 123.58 points, closing at 81,548.73, while the Nifty gained 32.40 points to finish at 25,005.50. However, foreign institutional investors sold shares worth Rs 3,472.37 crore, according to exchange data. This outflow of funds has contributed to the rupee’s decline. Despite these challenges, there are indications of potential support for the rupee from positive domestic equities and renewed negotiations between India and the US regarding trade relations.
Political Context and Future Outlook
Prime Minister Narendra Modi recently emphasized the importance of the US-India partnership, stating that both nations are “natural partners.” His comments came in response to President Donald Trump’s remarks about addressing trade barriers between the two countries. This dialogue is seen as an effort to mend strained relations following Trump’s decision to double tariffs on Indian goods. As negotiations continue, market participants are hopeful that a resolution could stabilize the rupee and improve investor sentiment in the coming days.
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