BENGALURU: The rupee fell to a new low of Rs 84.88 during intra-day trade on Thursday against the US Dollar. Pressured by increase in crude oil prices and a lingering depreciation bias, it depreciated by 4 paise, and settled at Rs 84.87 per dollar compared to Rs 84.83 on Wednesday.
Analysts pointed out that the rupee continues to hover in a weak range. Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said the recent US CPI data came in line with expectations, signalling potential continuity in the Federal Reserve’s rate-cut trajectory.
“However, the dollar held its ground near the key 106$ level, keeping pressure on the rupee. Additionally, FII selling resumed after a brief phase of buying, further contributing to rupee weakness,” he added.
The rupee is expected to trade near 84.5 against the dollar by end December. A strong dollar continues to create a depreciating bias for currencies globally and is likely to sustain FPI outflows from Indian markets in the near term.
“However, interventions by the RBI, supported by India’s healthy foreign exchange reserves, should help keep rupee volatility in check. Markets are anticipating fewer Fed rate cuts under a Trump presidency, as his proposed policies, such as tax cuts and higher tariffs, are likely to be inflationary. As a result, the 10Y UST yield has surged by 71bps between October and November (up to November 18), while the dollar index has strengthened by 5.4%, reaching its highest level in a year,” said Rajani Sinha, Chief Economist, CareEdge Ratings.
FPIs have withdrawn approximately $4 billion from Indian markets in November, following a record $11 billion in outflows in October. While high UST yields and a strong dollar have contributed to these outflows, other domestic factors have also been at play, such as muted corporate earnings and high valuations.
It is expected that the rupee will trade around 84 by the end of FY25. “Going forward, it will be crucial to monitor the implementation of Trump’s policies and China’s response, as these will play a key role in shaping market dynamics,” said Sinha.