The rupee logged its steepest single-day plunge in nearly two years ending the session sinking 58 paise on Monday to a historic low of 86.62 to the dollar that has been on a song since October, weighed down by a stronger greenback, surging crude prices and the continuing mayhem in the equity markets.
The rupee fell as much as 58 paise, or 0.67 percent, in a day making it the steepest fall since February 6, 2023 when the unit had lost 68 paise. This is in spite of the fact that the Reserve Bank has sold almost $115 billion to prop the unit since March and the most in October selling as much as $38 billion.
The rupee saw the deepest plunge of more than Re 1 in the past two weeks from the closing level of 85.52 on December 30 and the unit breached the 85-per-dollar mark for the first time on December 19.
Last Friday, the currency declined 18 paise to settle at 86.04, a day after registering a marginal gain of 5 paise. In the preceding back-to-back sessions, it plunged 6 paise and 17 paise, respectively.
Traders and currency analysts told TNIE that that unprecedented fall is due to the relentless chase of the dollar by investors, which also led to a massive withdrawal of foreign capital from equities. Since October foreign funds have pulled out close to Rs 2 trillion from equities.
Dilip Parmar, senior currency analyst at HDFC Securities told TNIE that he sees a rupee resistance at 86.90-87.30 while support is around 85.65.
“The risk averse sentiment across the globe ahead of Donald Trump taking charge as the 47th president of the US and worries over higher inflation can further weigh on the rupee,” Parmar said.
The bleeding rupee has spawned many a joke on prime minister Narendra Modi with a graph showing the bleeding rupee juxtaposed with the PM’s yoga asanas. X users to remind Prime Minister Narendra Modi and celebrities of their comments mocking the Manmohan Singh government on the currency’s depreciation before Modi came to power in May 2014 as he had promised that if voted to power rupee would be equal to a dollar.
Congress was at its best in blasting Modi with party general Secretary Jairam Ramesh taking to X to remind Modi of his past comments on the rupee: “When Modi took over as PM, he was about to turn 64, and the rupee was at 58.58 to the dollar. He waxed eloquent on making the rupee stronger and mockingly linked its fall to his predecessor's age.
“Well, now as Modi prepares to turn 75 later in the year, the rupee has already declined well past 86.52 As the fall continues, Modi has clearly been hoist with his own petard!," Ramesh said.
Ramesh also said “while the non-biological PM is rediscovering that he is a human after all, foreign investors in our stock markets have ushered in 2025 by taking out $2 billion just in the past six days. “This shows the growing impact of our weak macro fundamentals—stagnant wages, faltering private investment, slowdown in consumption growth and complete lack of investor confidence in our financial markets.
Trinamool congress general secretary Nilanjan Das posted a montage of Modi’s speeches poking fun at the late Singh’s currency management, saying: “the rupee has fallen to an all-time low of 86.52 to the dollar. Modi sees a deep political failure behind the fall of the rupee.”
Some X user recalled what actress Juhi Chawla had tweeted n 2013 when the rupee crossed the 60-mark: “Thank God, my underwear is named ‘Dollar’. If it was ‘Rupee’, it would keep falling;” and asking where her undies are now.
In speeches and tweets, Modi, the then Gujarat chief minister, had taken the Centre to task over the exchange rate between the rupee and the dollar increasing in favour of the greenback. In a 2013 tweet, Modi had said: “There is a competition between Congress and the rupee. Who will fall lower, that is the competition.”
While the immediate trigger for the dollar rally is the nearing Trump ascension on January 20, and the better-than-expected jobs growth in the US, leading many to feat that the Fed rate cut will just be one this year; the crude rally was due to the last week’s sweeping sanctions on Russia crude sales by the US, triggering Brent oil rally towards $81/barrel.
Anuj Choudhary of Mirae Asset, said the rising crude prices and global risk aversion may weigh on the rupee more and the immediate level many be 86.80.
The dollar rally has also spike the dollar index that gauges the greenback’s strength against a basket of six currencies, rose 0.29 percent to a two-year-high of 109.80.
Dalal Street continued to bleed with the Sensex crashing 1,048.90 points, or 1.36 percent to settle at 76,330.01 points and the Nifty tanking 345.55 points, or 1.47 percent, to 23,085.95 points.
The only positive news in the day retail inflation continued to ease for the second month in December to 5.22 percent down from 5.5 percent in November.