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Rupee Hits Record Low of 87.37 Against US Dollar


Last Updated: 5th February 2025 - 04:47 pm
The Indian rupee extended its losses, hitting a fresh low in afternoon trade on February 5, depreciating to 87.3763 against the US dollar. The decline comes amid weakening Asian equities, reflecting a broader risk-averse sentiment in the global financial markets.
At the start of the trading session, the domestic currency opened 5 paise lower at 87.1263 per US dollar, compared to the previous close of 87.0762. Persistent foreign fund outflows, concerns over global economic growth, and increasing trade tensions between the United States and China contributed to the rupee’s weakness.
Asian equity markets, which initially showed signs of recovery, trimmed their gains after Chinese shares opened lower. Investor caution prevailed as geopolitical uncertainties and trade disputes between the world’s two largest economies intensified.
Hong Kong stocks also experienced a downturn, while a broader index tracking Asian equities surrendered some of its earlier gains. China’s market reopening after the Lunar New Year holidays failed to boost sentiment, as investors remained wary of potential economic disruptions. Meanwhile, contracts for US equities edged lower following a decline in tech stocks. Google’s parent company, Alphabet Inc., and semiconductor giant Advanced Micro Devices Inc. saw sharp declines in extended trading, adding to the risk-off sentiment in the market.
In the bond market, US Treasury yields moved higher, signaling expectations of tighter monetary policy. Additionally, the Japanese yen strengthened against the US dollar as investors sought safe-haven assets amid market volatility.
The depreciation of the rupee poses multiple challenges for the Indian economy. A weaker currency increases the cost of imports, particularly crude oil, which could add to inflationary pressures. India, being a major importer of oil, faces the risk of rising fuel prices, which in turn may impact transportation and manufacturing costs, leading to a broader increase in consumer prices.
At the same time, a weaker rupee benefits exporters by making Indian goods and services more competitive in the global market. Sectors such as information technology, pharmaceuticals, and textiles could see some gains as their earnings in foreign currencies translate into higher revenues.
Despite short-term volatility, analysts suggest that the Reserve Bank of India (RBI) may intervene in the forex market to stabilize the rupee if depreciation becomes excessive. The central bank has maintained a cautious stance on managing liquidity while ensuring that inflation remains within its target range.
On February 4, the Indian rupee saw some temporary support due to easing tariff uncertainties and an improvement in liquidity conditions. However, global headwinds, including concerns over US Federal Reserve policy decisions and geopolitical risks, continue to drive volatility in the currency markets.
Looking ahead, traders and investors will closely monitor economic data releases, central bank actions, and geopolitical developments to assess the rupee’s trajectory. While external factors remain dominant in influencing the currency’s movement, domestic economic policies and foreign investment flows will also play a crucial role in determining its stability.
Market participants remain cautious as ongoing uncertainties in global trade relations and financial markets could lead to further fluctuations in the rupee’s value in the coming weeks.
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