Rupee hits all-time low of 84.50 against the US dollar amid market volatility

The rupee fell to a record low, closing 8 paise down at 84.50 per dollar on Thursday. The depreciation was attributed to a combination of domestic and global factors, including a massive sell-off in Indian equity markets and a surge in crude oil prices. Escalating geopolitical tensions, especially the Russia-Ukraine conflict, and continuous foreign fund outflows further pressured the currency.

At the interbank forex market, the rupee opened at 84.41 and slipped to an intra-day low of 84.51 before settling at 84.50. This marked a new nadir, surpassing its previous low of 84.46 on November 14. On Tuesday, the rupee had closed flat at 84.42, with markets remaining shut on Wednesday due to assembly elections in Maharashtra.

Key contributors to rupee’s decline

1. Strengthening US dollar:
   The dollar index, which measures the greenback against six major currencies, climbed to 106.66, reflecting heightened safe-haven demand amidst geopolitical tensions.

2. Crude oil prices:
   Brent crude rose 1.35 per cent to USD 73.93 per barrel, adding pressure on India’s import bill and contributing to the rupee's weakness.

3. Equity market rout:
   Domestic equities saw significant losses, with the Sensex dropping 422.59 points to 77,155.79 and the Nifty down 168.60 points to 23,349.90.

4. Foreign fund outflows:
   FIIs sold shares worth Rs 3,411.73 crore on Tuesday, as per exchange data, further denting market sentiment.

Market outlook

The rupee is expected to trade between 84.35 and 84.65 in the near term. With ongoing geopolitical uncertainties, including the Adani Group’s legal challenges in the US, analysts anticipate continued volatility. Investors are advised to remain cautious as the currency faces sustained downward pressure.