Rupee recovers from all-time low, appreciates to 84.83 against US dollar

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The Indian rupee has managed to recover slightly from its record low, gaining 5 paise to trade at 84.83 against the US dollar in early Friday trade. This recovery was largely attributed to favourable domestic inflation data, which showed a decline in retail inflation in November, bringing it within the Reserve Bank of India's target range.

The rupee opened at 84.85 on the interbank foreign exchange market, and inched up to 84.83, marking a 5 paise gain from its previous close. On Thursday, the rupee had ended at an all-time low of 84.88 against the dollar, following a loss of 5 paise. The previous record low was seen on December 9, when the rupee closed at 84.86.

While the rupee showed signs of recovery, forex traders noted that the gains were capped by a strengthening US dollar and ongoing volatility in the domestic equity markets, exacerbated by foreign fund outflows. The dollar index, which measures the greenback's strength against a basket of six major currencies, was up by 0.12 per cent at 106.77.

According to official data released on Thursday, India's retail inflation dropped to 5.48 per cent in November, primarily due to falling food prices. This decline has created room for the Reserve Bank of India to consider a rate cut in its upcoming policy review meeting under new Governor Sanjay Malhotra in February. However, the country's industrial production growth (IIP) slowed to 3.5 per cent in October 2024, largely due to weak performance in mining, power, and manufacturing sectors.

Despite the inflation data providing some optimism for the rupee, the ongoing strength of the US dollar, which surged following US inflation figures coming in as expected, limited the rupee's recovery. The prospect of a potential interest rate cut by the US Federal Reserve added to the greenback's strength.

Meanwhile, Brent crude oil prices saw a modest increase, rising by 0.01 per cent to USD 73.42 per barrel in futures trade. On the domestic front, the equity markets remained under pressure, with the Sensex falling by 388.68 points (0.48 per cent) to 80,901.28, while the Nifty dropped by 115.20 points (0.47 per cent) to 24,433.50 points. Both indices ended lower on Thursday.

In addition, Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, offloading shares worth Rs 3,560.01 crore, as per exchange data.

As per PTI, the rupee's movement continues to reflect a complex interplay of domestic inflation data, external factors like the dollar's strength, and market dynamics, with a cautious outlook in the near term.