Rupee Reaches Historic Low Amid Rising Crude Prices

The Indian rupee has fallen for the second consecutive session, closing down by 13 paise at an all-time low of 85.87 against the US dollar on January 8. This decline is attributed to ongoing pressure from increasing crude oil prices, a strong dollar, and a lackluster equity market.

At the start of the day, the rupee opened at 85.82 in the interbank foreign exchange market. It dropped to an intra-day low of 85.89 before finally settling at 85.87. The previous day, the currency had closed at 85.74, resulting in a six-paise loss.

Forex experts point to several factors leading to the depreciation of the rupee, including the outflow of foreign funds and cautious investor sentiments following the government's downward revision of economic growth forecasts. The National Statistics Office (NSO) recently slashed the GDP growth estimate for 2024-25 to 6.4%, the lowest in four years, mainly due to sluggish growth in the manufacturing and service sectors.

Additionally, the dollar index, which tracks the performance of the dollar against a basket of six major currencies, strengthened by 0.35%, reaching 108.76. Analysts noted that higher yields on 10-year US Treasury bonds, currently at 4.67%, reflect investor expectations of delayed rate cuts by the Federal Reserve.

Crude oil prices have also surged, with Brent crude, the global benchmark, climbing by 0.9% to approximately $77.74 per barrel, raising concerns over India's import expenses.

On the domestic front, equity markets did not provide much support. The BSE Sensex fell by 50.62 points to close at 78,148.49, while the Nifty declined by 18.95 points, ending at 23,688.95. Foreign institutional investors (FIIs) remained net sellers, disposing of shares worth ₹1,491.46 crore in the capital markets on Tuesday.

The continuing decline of the rupee emphasizes the critical need for policy measures to stabilize the currency amid challenging global conditions. Experts are closely monitoring upcoming economic data and policy decisions to predict the currency's future trajectory.

rupee, crude, economy