Rupee Reaches Record Low as Crude Prices Rise

On January 8, the Indian rupee continued its decline for the second consecutive session, closing 13 paise lower at a record low of 85.87 against the US dollar. This drop has been attributed to various factors including rising crude oil prices, a strong dollar, and lackluster performance in the equity markets.

The rupee opened the trading day at 85.82 in the interbank foreign exchange market and dipped to an intra-day low of 85.89 before settling at 85.87. The previous day's close was 85.74, reflecting a loss of six paise.

Experts in the foreign exchange market have pointed to a mix of conditions causing the rupee's fall. These include ongoing foreign fund outflows and concerns among investors following recent revisions to the government's economic growth projections. The National Statistics Office (NSO) has forecasted a GDP growth of 6.4% for the fiscal year 2024-25, marking it as the lowest in four years, which was impacted by weak performance in the manufacturing and services sectors.

Compounding the rupee's troubles, the US dollar has strengthened, with the dollar index rising by 0.35% to reach 108.76. Market analysts have also noted that the yield on 10-year US Treasury bonds has climbed to 4.67%, suggesting expectations for a delay in interest rate cuts by the Federal Reserve.

In the commodity markets, Brent crude oil prices saw a significant rise, trading up by 0.9% at $77.74 per barrel. This increase raises concerns regarding the cost of imports, especially for a country that relies heavily on oil imports like India.

The domestic stock markets did not provide any respite either. The BSE Sensex fell by 50.62 points to close at 78,148.49, while the Nifty 50 index saw a decline of 18.95 points, finishing at 23,688.95. Foreign institutional investors (FIIs) continued as net sellers, with a reported offloading of ₹1,491.46 crore in the capital markets on the same Tuesday.

The rupee's consistent decline indicates a necessity for policy changes to help stabilize the currency amidst these global challenges. Analysts are now keenly observing upcoming data releases and government policy decisions that might influence the currency's trajectory moving forward. The rupee fell 13 paise to 85.87, marking its second straight record low, as stronger crude oil prices and a robust dollar continued to weigh on the currency.

rupee, dollar, crude