The Indian Rupee has reached a historic low of 83.29 against the US dollar. This decline is attributed to the strength of the American currency in global markets, along with a negative trend in domestic equities, affecting investor sentiments, according to forex traders.
For the fourth consecutive day, the rupee depreciated, settling 13 paise lower at its all-time low of 83.29 (provisional) against the US dollar on Monday. This decline is primarily due to risk aversion in global markets and rising crude oil prices.
Additionally, the strong performance of the US dollar against other major currencies worldwide and a negative trend in domestic equities have dampened investor sentiment, as reported by forex traders.
In the interbank foreign exchange market, the domestic unit began trading at 83.09 against the dollar and fluctuated within the range of 83.09 to 83.30 against the greenback.
The rupee eventually concluded the day at the record low of 83.29 against the dollar, marking a 13 paise drop from its previous close. On the preceding Friday, the rupee had fallen by 13 paise, settling at 83.16 against the US dollar.
The dollar index, which measures the strength of the US dollar against a basket of six currencies, experienced a marginal decrease of 0.11 percent, resting at 105.20.
Meanwhile, Brent crude futures, the global benchmark for oil, were trading 0.42 percent higher at $94.32 per barrel.
Dilip Parmar, a Research Analyst at HDFC Securities, noted that the rupee closed at another record low ahead of a holiday. This drop was attributed to risk-averse sentiments and a surge in crude oil prices.
Parmar anticipates high volatility in the coming week due to central bank policy rate meetings in developed and emerging market economies. He expects the US dollar to maintain its strength during this period. In the short term, spot USD/INR is projected to surpass the record high and may reach a level between 83.50 to 83.70, while maintaining support at 83.
Turning to the domestic equity market, the BSE Sensex concluded 241.79 points or 0.36 percent lower at 67,596.84 points. Simultaneously, the broader Nifty recorded a decline of 59.05 points or 0.29 percent, ending at 20,133.30 points.
Forex traders attribute the rupee’s depreciation to various factors, including elevated crude oil prices, a robust US dollar, foreign fund outflows, and an expanding trade deficit.
According to government data, India’s exports decreased by 6.86 percent to $34.48 billion in August compared to the same month last year. Imports also saw a decline of 5.23 percent, totaling $58.64 billion, as opposed to $61.88 billion recorded in August 2022.
Furthermore, India’s forex reserves decreased by $4.992 billion to $593.904 billion for the week ending September 8, as reported by the Reserve Bank of India. In the previous reporting week, the reserves had increased by $4.039 billion, reaching $598.897 billion.
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