The Indian rupee plunged 9 paise to hit the record low of Rs 85.83 against the US dollar in early trade on January 8, which is 0.069 per cent lower than Rs 85.77 an all time low touched on January 4. The decline in the rupee is due to the strengthening of the American dollar and the rise in crude oil prices.
Another major reason for fall is the muted market activity in the domestic equity market that put pressure on the Indian currency. The weakening of the Indian rupee can be seen from late October, 2024 during the US election campaign and it bolstered with the victory of Trump on November 5, 2024. The Trump administration is usually expected to have stringent monterey policies that became the main reason for continuous decline.
At the interbank foreign exchange, the rupee opened at Rs 85.82 and slipped further to Rs 85.83 against the US dollar initially, which is 9 paise lower than the previous close. Meanwhile, the dollar index was trading 0.09 per cent higher at 108.48.
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Sriram Iyer, Senior Research Analyst at Reliance Securities said, “The Indian Rupee could open weaker against the Dollar on Wednesday tracking an overnight rally in the Dollar and U.S. bond yields. The NDF markets are indicating that the Rupee could open around in the range of Rs 85.8000 to Rs 85.8200 against the U.S. dollar, compared with Rs 85.7225 in the previous session. The broad range for the $-rupee spot remained between 85.6800 to 85.8700 this Wednesday.”
He added, “Additionally, slower domestic economic growth and easing capital flows could also weigh. Meanwhile, Indian GDP slowed after data showed growth dipped to 6.4% in FY25, its lowest level in four years. Asian peers have started weaker and a rally in crude prices will weigh on the Rupee this Wednesday.”
Lower GDP forecast
Another reason that bolstered the downward trend is the announcement made by the Indian government recently that the country’s economic growth in 2024-25 is expected to downgrade to a four-year low of 6.4 per cent, mainly due to weaker performance in manufacturing and services. This is lower than the 6.6 per cent growth projected by the Reserve Bank of India in December 2024.
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