The Indian rupee weakened by 3 paise to close at an all-time low of 84.94 against the US dollar on December 18, as traders awaited cues from the US Federal Reserve on interest rate decisions. The rupee’s decline was fueled by strong dollar demand from importers and foreign banks, continued foreign fund outflows, and a lackluster trend in domestic equities, which dampened investor sentiment.
At the inter-bank foreign exchange, the rupee opened at Rs 84.92 against the dollar and hit an intra-day low of Rs 84.95. It finally settled 3 paise lower at Rs 84.94 (provisional), marking a new record low. On Tuesday, the rupee had revisited its previous record low of 84.91 against the greenback.
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Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities said,”The rupee traded at 84.91 ahead of what is being dubbed as the “judgment day” for the dollar, as the Federal Reserve concludes its final policy meeting for the calendar year 2024 today. All eyes will be on the Fed’s forecast and statement, especially regarding its stance on inflation and economic outlook. While a 0.25bps rate cut is expected, the critical focus will remain on forward guidance and the tone of Fed Chair Powell’s remarks..”
Market participants are awaiting key data releases, including the US current account balance and housing data, as well as the outcome of the US Federal Open Market Committee (FOMC) meeting. The Federal Reserve is expected to announce a 25 basis point interest rate cut, bringing the target range to 4.5 per cent.
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In addition to external factors, India’s widening trade deficit has put further strain on the rupee. The country’s trade deficit surged to a record high of $37.84 billion in November, driven largely by a spike in gold imports, which reached a record $14.86 billion. India’s exports also contracted by 4.85 per cent year-on-year in November, amounting to $32.11 billion, according to commerce ministry data.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six major currencies, rose by 0.04 per cent to 107.
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