Rupee recovers from record low, gains 3 paise to 84.69 against USD

Rupee rebounded slightly on Tuesday, closing at 84.69 against the US dollar, up by 3 paise from its all-time low of 84.72 in the previous session. The recovery was supported by a rally in domestic equities, though trade remained range-bound due to persistent global and domestic pressures.

Key drivers behind rupee movement

Forex traders noted that the rupee's recent depreciation stemmed from geopolitical and macroeconomic concerns:

1. BRICS currency tensions: US President-elect Donald Trump’s threat of a 100 per cent tariff on BRICS nations if they undermine the US dollar added volatility.

2. Global headwinds: Political instability in the Eurozone and escalating tensions in the Middle East exerted pressure on emerging market currencies.

3. FPI outflows: Foreign Institutional Investors (FIIs) offloaded shares worth Rs 238.28 crore on Monday, adding to the strain on the rupee.

Additionally, the Dollar Index, which measures the greenback's strength against six currencies, fell 0.18 per cent to 106.25, offering some relief to the rupee.

Domestic market sentiment

On the equity front, the Sensex surged 597.67 points (0.74 per cent) to close at 80,845.75, while the Nifty gained 181.10 points (0.75 per cent) to settle at 24,457.15, reflecting a positive sentiment among investors.

Finance Minister Pankaj Chaudhary highlighted India’s economic resilience, noting that the rupee remains one of the best-performing Asian currencies despite global challenges. He attributed the currency's recent slide to the broad-based strength of the US dollar, which has risen 4.8 per cent in 2024.

Upcoming triggers

Market participants are closely monitoring the Reserve Bank of India's monetary policy decision on December 6, where balancing inflation and growth will be key themes.

The rupee's depreciation, while a concern for importers, could enhance export competitiveness, potentially benefiting the broader economy. However, the RBI continues to monitor global developments to stabilize the USD-INR exchange rate.

Brent crude, a significant factor for the Indian economy, traded higher at USD 72.63 per barrel, up 1.11 per cent, adding to concerns over import costs.