Rupee sinks to record low of 84.92 against US dollar
Rupee hits a record low of 84.92 against the US dollar, pressured by foreign fund outflows, widening trade deficit, and rising gold imports, reflecting weak domestic market sentiment.
The rupee slipped to a new record low of 84.92 against the US dollar in early trade on Tuesday, pressured by persistent foreign fund outflows and a lacklustre trend in domestic equities. Weakening market sentiment and rising dollar demand from importers and foreign banks contributed to the rupee’s decline.
At the interbank foreign exchange, the rupee opened at 84.89 and later weakened further to 84.92, marking a marginal fall from the previous close of 84.91. On Monday, the rupee had already touched its lowest level due to mounting concerns over India’s widening trade deficit.
The pressure on the rupee follows a significant surge in gold imports and subdued export performance. India’s exports in November fell by 4.85 per cent year-on-year to USD 32.11 billion, while the trade deficit widened to a historic high of USD 37.84 billion. This was primarily driven by a sharp rise in gold imports, which soared to USD 14.86 billion in November 2024 compared to USD 3.44 billion during the same period last year. The spike in gold demand is attributed to seasonal festival and wedding-related purchases.
Adding to the rupee’s weakness, foreign institutional investors (FIIs) continued to offload Indian equities. On Monday alone, FIIs sold shares worth Rs 278.70 crore in the capital markets, dampening investor sentiment further.
Meanwhile, Brent crude prices eased slightly in futures trade, dropping to USD 73.82 per barrel, which provided little relief to the rupee. The dollar index, a measure of the US dollar’s strength against six major currencies, remained relatively steady at 106.83.
On the domestic equity front, both benchmark indices were trading in the red. The BSE Sensex was down over 300 points, while the NSE Nifty slipped over 100 points in morning trade, reflecting weak investor sentiment.
Analysts expect the rupee to remain under pressure in the near term, with ongoing dollar demand from foreign banks and importers. Any intervention by the Reserve Bank of India (RBI) to stabilize the rupee will remain crucial in the coming sessions.
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