The rupee weakened by eight paise to reach a record low of 84.50 (provisional) against the US dollar on Friday, pressured by a sharp sell-off in domestic equity markets and rising crude oil prices amid geopolitical volatility.
Forex traders claim that the US dollar gained strength due to its safe-haven appeal amid rising tensions between Russia and Ukraine, while the ongoing outflow of foreign funds further weighed on the domestic currency.
The rupee began at 84.41 versus the US dollar at the interbank foreign exchange and fell as low as 84.51 during the day. The unit surpassed its previous all-time low closing level of 84.46 on November 14 to close the session at 84.50 (provisional) versus the dollar.
The rupee remained stable against the US dollar on Tuesday, closing at 84.42. Due to elections in Maharashtra, the foreign exchange market was closed on Wednesday.
Jateen Trivedi, VP Research Analyst-Commodity and Currency at LKP Securities, stated that the rupee declined as pressure increased because the dollar rose over 106.65 amid fresh global fluctuations, with geopolitical tensions between Russia and Ukraine contributing to a worldwide aversion to risk.
At the same time, the Adani Group was charged with bribery and fraud in the US, which caused a sell-off in domestic equity markets. According to Trivedi, this has encouraged FII outflows even further, perpetuating the pattern of capital flight from Indian markets.
Trivedi noted that the rupee is predicted to trade between 84.35 and 84.65, with further declines anticipated in the near future. At 106.66, the dollar index, which measures the strength of the US dollar relative to a basket of six other currencies, was up 0.04 per cent.
In futures trading, Brent crude—the global benchmark for oil—rose 1.35 per cent to USD 73.93 a barrel. The 30-share BSE Sensex fell 422.59 points or 0.54%, to end at 77,155.79 points in the equity market, while the Nifty fell 168.60 points or 0.72%, to conclude at 23,349.90 points.
According to exchange statistics, foreign institutional investors (FIIs) sold shares worth Rs 3,411.73 crore on Tuesday, making them net sellers in the capital markets.
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