Rupee hits all-time low of 85.16 against US dollar amid capital outflows and rising oil prices

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The Indian rupee fell by 5 paise to reach a new all-time low of 85.16 against the US dollar in early trade on Tuesday. The decline came as a result of a stronger American currency and ongoing outflows of foreign capital. According to PTI, the rupee opened at 85.10 against the greenback, but quickly slid further to hit the record low of 85.16, marking a loss of 5 paise from its previous close.

The persistent demand for the US dollar, coupled with rising crude oil prices, significantly impacted the rupee's value. The volatile geopolitical environment has contributed to the upward momentum in crude oil prices, which in turn, exerted additional pressure on the Indian currency. Forex traders noted that despite the positive sentiment in the domestic equity markets, the rupee's decline continued as the dollar remained strong globally.

The strength of the US dollar was reinforced by soaring US Treasury yields, which prompted foreign investors to adjust their portfolios, often resulting in profit-booking through the sale of Indian equities. As per PTI, the foreign institutional investors (FIIs) were net sellers in the capital markets on Monday, offloading shares worth Rs 168.71 crore.

Meanwhile, the dollar index, which tracks the greenback's performance against a basket of six major currencies, was trading higher by 0.10 per cent at 107.92, supported by fears of delayed interest rate cuts by the US Federal Reserve. This, in turn, heightened demand for the dollar, adding to the pressure on the rupee.

In addition to the strengthened dollar, the rise in Brent crude oil prices contributed to the rupee's depreciation. As per PTI, Brent crude futures rose by 0.30 per cent to USD 72.85 per barrel, further elevating concerns about India's trade balance and the impact on the rupee.

On the domestic front, the equity market provided some relief as the Sensex was trading marginally higher by 15.97 points, or 0.02 per cent, at 78,556.14 points. The Nifty index also saw a slight gain of 13.70 points, or 0.06 per cent, to reach 23,767.15 points.

Despite this, the negative external factors, including the strong US dollar, rising bond yields, and geopolitical instability, continued to weigh heavily on the Indian currency. The outlook for the rupee remains uncertain, with sustained capital outflows and a robust dollar providing little support for the local unit in the short term.

(With inputs from PTI)