The rupee continued its downward trend for the second consecutive day, dropping by 13 paise on Wednesday to hit a new all-time low of 85.87 (provisional) against the US dollar. Rising oil prices and a strong US dollar were factors behind the decline.
Foreign exchange analysts said the lackluster performance of the domestic stock market and continued overseas capital outflows were putting further pressure on the currency. Investor sentiment remained cautious following the government’s downward revision to its economic growth outlook, adding to the rupee’s woes.
Another major reason for the decline is the slowdown in market activity in the domestic stock market, which put pressure on the Indian currency. The depreciation of the Indian rupee has been seen since late October 2024 during the US election campaign, and further strengthened with President Trump’s victory on November 5, 2024. The Trump administration is typically expected to follow a strict Monterey policy, which was the main reason for the depreciation of the Indian rupee. Continuous decline.
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The rupee depreciated by 5 paise to 85.53 rupees to the dollar on the back of high dollar demand and overseas outflows.
In interbank foreign exchange, the rupee opened at $85.82 and touched a record low of $85.89 against the dollar during the day. Against the dollar, the exchange rate settled at 85.87 (provisional), 13 paise lower than the previous closing price.
On Tuesday, the rupee fell by 6 paise to settle at 85.74 rupees against the dollar. Meanwhile, the dollar index, which measures the dollar’s strength against a basket of six currencies, was trading 0.35% higher at 108.76.
“The Indian rupee could open weaker against the dollar on Wednesday following the overnight rise in the dollar and US Treasury yields,” said Sriram Iyer, senior research analyst at Reliance Securities. . The NDF market suggests that the rupee may open in the range of Rs 85.8000 to Rs 85.8200 against the US dollar, up from the earlier reading of Rs 85.7225. The broad range of dollar-rupee spot this Wednesday was between $85.6800 and $85.8700. ”
“Additionally, slower domestic economic growth and easing of capital flows could also weigh on the economy,” he added. Meanwhile, India’s GDP slowed after data showed growth fell to 6.4% in FY2025, the lowest in four years. Asian countries are off to a weak start and rising oil prices will weigh on the rupee this Wednesday. ”
GDP downward revision forecast
Another reason for the declining trend is that the country’s economic growth rate for 2024-2025 has been revised downward to 6.4%, the lowest level in four years, mainly due to weak performance in the manufacturing and service industries. This is what the Indian government recently announced. This is lower than the Reserve Bank of India’s 6.6% growth forecast for December 2024.
The gross domestic product (GDP) growth rate of 6.4% is the lowest since the year of the coronavirus pandemic (2020-21), when the country recorded negative growth of 5.8%. In the previous fiscal year ending March 2024, it was 8.2%.
In the domestic stock market, the 30-share BSE Sensex was trading 180.32 points (0.23%) lower at 78,018.79 points and the Nifty was down 47.35 points (0.20%) at 23,660.55 points.
Foreign institutional investors (FIIs) on Tuesday outflowed Rs 1,491.46 crore from the capital market on a net basis, according to exchange data.
(With PTI input)
