Rupee at record low: Dealers explain key factors behind the drop

The Indian rupee is on track for its steepest single-day fall since February 2023. In the morning trade on Monday (January 13), the currency dropped 27 paise to hit a record low of 86.31 against the US dollar.

Here are the key drivers of the rupee’s decline

Strengthening US dollar

The dollar index, which measures the greenback against six major currencies, climbed 0.22% to 109.72, its highest level in over two years.

Better-than-expected job growth in the US has fueled expectations of slower Federal Reserve rate cuts, keeping the dollar strong

Surge in crude oil prices

Brent crude rose 1.44% to $80.91 per barrel, increasing India’s import costs.

This has added pressure on the rupee, as higher oil prices widen the country’s trade deficit.

Foreign fund outflows

Foreign institutional investors (FIIs) have been consistent sellers in Indian markets. On Friday (January 10), they sold ₹2,254.68 crore worth of equities, according to exchange data.

Weak domestic market sentiment

Domestic equity markets also mirrored global weakness.

The BSE Sensex dropped by 550.49 points to 76,828.42, while the Nifty slid 182.45 points to 23,249.05 during early trade.

Declining forex reserves

India’s forex reserves fell by $5.693 billion to $634.585 billion in the week ending January 3. This decline has further weakened the rupee’s resilience against external pressures.

Outlook for the day

The rupee’s performance throughout the session will depend on global market trends, oil price movements, and domestic equity performance.

Forex traders warn of continued volatility, especially with the US dollar expected to remain strong.

–With PTI inputs