Rupee hits a new low at 85.87 against the US dollar as crude prices surge

The rupee continued its downward trend for the second consecutive session, closing 13 paise lower at an all-time low of 85.87 against the US dollar on January 8. Persistent pressure from rising crude oil prices, a robust dollar, and muted equity market performance dampened the sentiment further.

Opening the day at 85.82 at the interbank foreign exchange market, the rupee slipped to an intra-day low of 85.89 before settling at 85.87. On the previous day, the currency had ended at 85.74, marking a six-paise loss.

Forex analysts attributed the rupee's depreciation to a combination of factors, including sustained foreign fund outflows and investor caution following the government's downward revision of economic growth projections. The National Statistics Office (NSO) recently estimated GDP growth for 2024-25 at six-point-four per cent, a four-year low, citing sluggish performance in manufacturing and services.

Additionally, the dollar index, which measures the greenback's performance against a basket of six major currencies, strengthened by zero-point-three-five per cent to reach 108.76. Market participants noted the elevated yields on 10-year US Treasury bonds, which stood at four-point-six-seven per cent, reflecting expectations of a delay in Federal Reserve rate cuts.

Meanwhile, Brent crude, the global benchmark, surged by zero-point-nine per cent to trade at seventy-seven-point-seven-four dollars per barrel, further exacerbating concerns about India's import costs.

Domestically, equity markets offered little relief, with the BSE Sensex slipping by fifty-point-six-two points to close at 78,148.49, while the Nifty declined by eighteen-point-nine-five points to 23,688.95. Foreign institutional investors (FIIs) remained net sellers, offloading Rs 1,491.46 crore in the capital markets on Tuesday.

The rupee's weakening trajectory underscores the need for policy adjustments to stabilize the currency amid global headwinds. Analysts are closely watching upcoming data releases and policy decisions to gauge the path 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.