The rupee depreciated 13 paise to close at a fresh record low of 85.65 (provisional) against the US dollar on Tuesday, marking a 3 percent loss for the year due to significant foreign fund outflows and a strong greenback in global markets.
Forex traders attribute the rupee's sustained pressure to the Federal Reserve's cautious stance on rate cuts, the strengthening dollar index (DXY) driven by the "Trump factor," and US 10-year bond yields. Domestic factors like slowing economic growth, widening trade deficit, and continued foreign fund outflows have further contributed to the decline of the rupee.
At the interbank foreign exchange, the rupee opened at 85.54, reaching a low of 85.66 against the US dollar during intra-day trade. It closed at 85.65 (provisional), down by 13 paise from the previous day's close.
Over the course of 2024, the rupee has depreciated nearly 3 percent, falling from 83.16 on December 29, 2023, to 85.65 on December 31, 2024. The currency breached the 84-level in October, surpassed 85 in December, and hit a lifetime low of 85.80 on December 27.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, predicts the rupee to trade negatively due to elevated crude oil prices, a strong US dollar, and month-end dollar demand from importers. Foreign funds selling off investments and geopolitical uncertainties also weigh on the currency.
India's external debt increased to USD 711.8 billion as of September 2024, up 4.3 percent from June 2024. The dollar index was trading lower at 108.01, while Brent crude rose to USD 74.41 per barrel. The domestic equity market saw the Sensex close lower by 0.14 percent and the Nifty settle flat.
India's current account deficit moderated to USD 11.2 billion or 1.2 percent of GDP year-on-year in the July-September quarter of 2024-25, according to RBI data.
