The Indian rupee fell to an all-time low of 95.63 against the US dollar in early trading on Tuesday, breaching its previous record low. The decline was driven by sustained demand for the greenback from importers and foreign banks, coupled with rising crude oil prices.
Factors Behind the Fall
Forex traders attributed the rupee's weakness to a combination of global and domestic factors. The US dollar strengthened against major currencies as expectations of further interest rate hikes by the Federal Reserve boosted demand. Additionally, elevated crude oil prices, which have risen due to supply concerns, added pressure on the rupee as India imports most of its oil needs.
Impact on Markets
The equity markets also witnessed selling pressure, with the benchmark Sensex falling over 300 points in early trade. The sell-off was led by banking and energy stocks. Analysts expect further volatility in the currency markets amid global uncertainty.
Previous Record
The rupee had previously hit a record low of 95.33 against the dollar on October 10, 2022. The latest slide reflects persistent foreign fund outflows and a widening trade deficit.
Government and RBI Response
The Reserve Bank of India (RBI) is closely monitoring the situation and is likely to intervene in the forex market to curb excessive volatility. However, traders believe that the central bank may allow gradual depreciation to maintain export competitiveness.
Market participants will keep an eye on upcoming US inflation data and the RBI's monetary policy meeting for further cues.
