Rupee hits all-time low of 84.13 against dollar amid foreign fund outflows

Representational Pic

The Indian rupee fell 2 paise to reach an unprecedented low of 84.13 against the US dollar in early trade on Tuesday, impacted by continued foreign fund outflows and a subdued trend in domestic equities, according to PTI. Forex traders noted that market sentiment remains cautious due to the uncertain outcome of the US presidential election, coupled with an upcoming Federal Reserve policy announcement, both of which are expected to influence market movements over the next few days.

The rupee opened at 84.13 against the dollar at the interbank foreign exchange market, registering a slight decline of 2 paise compared to its previous close. This comes after the rupee had already reached a historic low of 84.11 against the US dollar on Monday.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, explained that the rupee's decline is partly a reflection of mounting pressures from US political events, combined with persistent foreign fund outflows from Indian markets. "The Reserve Bank of India (RBI) has been present to intervene but has allowed a gradual depreciation, which has taken the rupee to new lows against the dollar," Bhansali stated.

Meanwhile, the dollar index, which measures the value of the US dollar against a basket of six other major currencies, was trading slightly higher at 103.91, marking a 0.03 per cent increase. On the global oil front, Brent crude rose modestly, gaining 0.19 per cent to reach USD 75.22 per barrel in futures trade. Rising crude prices have also contributed to the rupee's downward trend, as India's oil import costs increase, further pressuring the domestic currency.

Forex experts have predicted that the rupee may continue trading within a narrow range throughout the day, as it contends with a strong dollar and higher oil prices. However, any intervention from the RBI could provide some support, potentially limiting further depreciation.

On the domestic equity front, the stock market also opened on a cautious note. The BSE Sensex dropped by 184.51 points, or 0.23 per cent, to reach 78,597.73, while the Nifty fell by 50.85 points, or 0.21 per cent, to 23,944.50 points.

According to exchange data, foreign institutional investors (FIIs) have continued their selling streak, offloading shares worth Rs 4,329.79 crore on Monday. This sustained outflow of foreign capital has added to the rupee's challenges, with investor confidence remaining low in the face of global uncertainties.

In slightly more optimistic news, India's manufacturing sector showed signs of recovery, rebounding from an eight-month low recorded in September. As per a monthly survey released on Monday, the sector's growth rate improved to 57.5 in October, driven by a faster pace of total new orders and an increase in international sales.

While the rupee's record low highlights the ongoing volatility in financial markets, analysts are hopeful that once global uncertainties, such as the US presidential election, are resolved, investor confidence may recover, helping stabilise the rupee. Until then, all eyes remain on the US, with expectations that the outcome of the Federal Reserve's monetary policy announcement could bring further market adjustments in the days to come.

(With inputs from PTI)