Rupee hits record low of 84.23 against US dollar amid foreign fund outflows

06 November,2024 10:19 AM IST |  Mumbai  | 

The rupee reached a historic low of 84.23 against the US dollar in early trade on Wednesday due to continued foreign fund outflows and the strong performance of the dollar. The volatility is expected to settle following the US election outcome and upcoming Federal Reserve rate decisions.

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The rupee declined by 14 paise, reaching a record low of 84.23 against the US dollar in early Wednesday trade, impacted by ongoing foreign fund outflows and the strength of the American dollar in global markets, according to PTI. Forex traders cited the current US election as a factor in the recent market volatility, with analysts predicting that currency movements may stabilise once a clear winner emerges in this closely contested race.

As per PTI, the rupee opened at an unprecedented low of 84.23 against the dollar at the interbank foreign exchange, marking a 14-paise drop from its previous close. The Indian currency had ended Tuesday's session slightly stronger, settling at 84.09 against the US dollar.

The US dollar's strength is evident from the dollar index, which measures the greenback's value against six major currencies. According to PTI, the index was up 1.64 per cent, standing at 105.11. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that the dollar index gained after initial election results showed former President Donald Trump leading in early counts, including projections in the Senate and House of Representatives.

According to PTI, the Federal Reserve's monetary policy is another factor influencing the markets, with an anticipated interest rate cut expected later this week. Analysts project further rate cuts of up to 100 basis points in 2025, which could have a significant impact on the dollar and subsequently on the rupee. Bhansali remarked that much will depend on how the Reserve Bank of India (RBI) responds, including its decision on where to open the rupee and how to manage fluctuations during intra-day trading based on the US election results. He suggested that the rupee could see a wide trading range between 84.00 and 84.35.

Meanwhile, Brent crude, the global oil benchmark, fell by 0.98 per cent to USD 74.79 per barrel in futures trade, as per PTI. Lower crude prices often provide relief to import-heavy economies like India, although currency depreciation continues to weigh on trade costs.

On the domestic front, equity markets demonstrated resilience despite the rupee's weakness. The Sensex gained 390.93 points, or 0.49 per cent, to reach 79,867.56, while the Nifty advanced 135.60 points, or 0.56 per cent, to 24,348.90 in early trading.

According to PTI, foreign institutional investors (FIIs) were net sellers in Indian markets on Tuesday, offloading shares worth Rs 2,569.41 crore. This continuous outflow of foreign funds has added pressure on the rupee, contributing to its historic low against the dollar.

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