The Indian rupee weakened to an all-time closing low of 94.86 against the US dollar on Tuesday, surpassing its previous record low of 94.75 touched earlier this month. The domestic currency opened weaker at 94.80 and moved in a range of 94.80 to 94.92 during the session before settling at 94.86, down 14 paise from its previous close of 94.72.
Factors Behind the Decline
Forex traders attributed the rupee's fall to persistent demand for the US dollar from importers, particularly oil companies, and sustained foreign capital outflows. The dollar index, which measures the greenback's strength against a basket of six major currencies, was trading 0.1% higher at 108.50, adding pressure on emerging market currencies.
Additionally, the sell-off in domestic equities weighed on investor sentiment. The benchmark BSE Sensex declined 356 points, or 0.5%, to end at 72,790, while the Nifty 50 slipped 104 points to 22,012. Foreign institutional investors (FIIs) remained net sellers in the capital markets, offloading shares worth Rs 1,234 crore on Monday, as per exchange data.
Impact of Global Factors
Global cues also played a role, with the US dollar strengthening on expectations that the Federal Reserve may maintain higher interest rates for longer. The 10-year US Treasury yield rose to 4.35%, attracting foreign capital to dollar-denominated assets. Meanwhile, crude oil prices remained elevated, with Brent crude hovering around $82 per barrel, increasing India's import bill and fueling demand for dollars.
Analysts noted that the Reserve Bank of India (RBI) likely intervened through state-run banks to curb excessive volatility, but the pressure on the rupee persisted. The central bank's intervention was seen in the forward market as well, with some dollar selling reported at higher levels.
Market Outlook
According to traders, the rupee is expected to remain under pressure in the near term due to the strong dollar and ongoing foreign fund outflows. The local unit may test the 95 mark against the greenback in the coming sessions if the dollar continues to strengthen and equity markets remain weak. However, any aggressive intervention by the RBI could provide some support.
The rupee's all-time low comes amid a broader trend of weakness in Asian currencies, with the Chinese yuan, South Korean won, and Japanese yen also declining against the dollar. The currency's performance will be closely watched ahead of key US economic data releases later this week, including inflation and retail sales figures.
