Rupee Hits Record Low of 87.55 Against US Dollar

The Indian rupee depreciated to an all-time low of 87.5525 against the US dollar, primarily due to a stronger dollar index and escalating crude oil prices, which have fueled the demand for dollars among oil marketing companies, according to currency experts. The continuous outflow of foreign funds and global economic uncertainties have also contributed to the rupee’s weakness.

The domestic currency opened nearly 6 paise lower at 87.5137 per US dollar before slipping to its record low of 87.5525. This marked a further decline from its previous close of 87.4600 against the greenback. Analysts attribute this depreciation to various macroeconomic factors, including the strengthening of the US dollar in global markets, rising inflation concerns, and a surge in crude oil prices, which puts additional pressure on the rupee.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The dollar index, which measures the value of the US currency against a basket of six major global peers, rose to 107.655 in early trade, compared to 107.579 in the prior session. A stronger dollar often makes emerging market currencies, including the rupee, more vulnerable to depreciation.

Experts believe the US Federal Reserve’s continued hawkish stance on interest rates has contributed to the dollar’s strength. The Fed’s commitment to keeping rates elevated for an extended period has made the dollar more attractive to investors, leading to capital outflows from emerging markets like India. As a result, foreign institutional investors (FIIs) have been pulling out funds from Indian equities, further pressuring the rupee.

Another major factor impacting the rupee is the rise in global crude oil prices. Brent crude prices edged higher in early Asian trade, driven by Saudi Aramco’s decision to significantly increase oil prices for March deliveries. The state-owned oil giant announced sharp price hikes for Asian buyers, citing rising demand from China and India amid US sanctions on Russian oil supplies.

Brent crude was trading at $74.72 per barrel, up by 11 cents or 0.15% at the time of reporting. India, being a net importer of crude oil, faces higher import costs when crude oil prices rise, leading to increased demand for dollars from oil marketing companies to pay for imports. This, in turn, exerts downward pressure on the rupee.

Amit Pabari, Managing Director at CR Forex Advisors, stated that the rupee is expected to trade within a range of 87.20 to 87.60 in the near term, with 87.20 acting as a crucial support level. He also noted that global factors, including geopolitical tensions, US economic data, and upcoming policy decisions by central banks, will play a key role in determining the rupee’s movement.

In addition to crude oil prices and the US dollar index, traders will closely monitor India’s trade deficit, inflation data, and foreign exchange reserves to assess the rupee’s future trajectory. Any further depreciation in the rupee could prompt intervention from the Reserve Bank of India (RBI) to stabilize the currency.

Despite the rupee’s weakness, some analysts believe that India’s strong economic fundamentals and robust foreign exchange reserves may prevent a steep fall beyond the current levels. However, the currency is likely to remain under pressure as long as global economic uncertainties persist.

Investors and businesses will need to keep a close watch on currency fluctuations, as a weaker rupee could impact import costs, inflation, and overall economic growth. With multiple global and domestic factors at play, market participants should brace for continued volatility in the forex market.