Rupee hits record low for 8th straight session at 85.73 per USD

The Indian rupee depreciated by 9 paise to close at 85.73 against the US dollar on Thursday, January 2, 2025, as strong dollar demand from importers and foreign fund outflows weighed on investor sentiments. This marked the eighth consecutive trading session where the rupee ended at a record closing low against the dollar.

At the interbank foreign exchange, the rupee opened on a weak note, hitting an intra-day low of 85.79 and a high of 85.68 against the American currency. By the end of the day, the local unit settled provisionally at 85.73, down 9 paise from its previous close, despite a sharp recovery in domestic equities.

On Wednesday, the rupee had closed flat at 85.64 against the US dollar. Just days earlier, on December 27, the currency had touched its lifetime intra-day low of 85.80 against the greenback.

Forex traders noted that the dollar remained strong against most global currencies throughout 2024 and continued its robust performance into the new year. Persistent foreign fund outflows further dampened investor sentiment. Additionally, global markets experienced reduced volumes due to the ongoing holiday season in major economies, including those in Europe.

“We expect the rupee to trade with a negative bias on strength in the US dollar and dollar demand from importers. Sustained FII outflows may further pressure the rupee,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, as quoted by news agency

PTI. He added, “However, any intervention by the Reserve Bank of India (RBI) may support the rupee at lower levels. USDINR spot price is expected to trade in a range of 85.50 to 86.”

Why the depreciation of the rupee against the USD is not a major negative

The significant depreciation of the INR against the USD may not necessarily be a cause for alarm. In fact, a weaker rupee could benefit domestic industries and improve export competitiveness. Concerns about excessive rupee depreciation might be overstated.

Historical data shows the rupee has often depreciated by 2-5% annually in many years. Since 2019, the average yearly depreciation stands at 3.3%. If the rupee follows this trend and depreciates by 3% in 2025, it will reach ₹88 per dollar—aligning with historical patterns.

Sensex, Nifty gain nearly 1.9%

In the domestic equity market, the 30-share BSE Sensex surged by 1,436.30 points, or 1.83%, to close at 79,943.71 points. Similarly, the Nifty climbed 445.75 points, or 1.88%, to settle at 24,188.65 points. Meanwhile, foreign institutional investors (FIIs) sold off ₹1,782.71 crore on a net basis in the capital markets on Wednesday, according to exchange data.