Rupee Hits Record Low of 91.37 Against U.S. Dollar

The Indian rupee dropped to 91.37 against the U.S. dollar on January 21, down 0.39% from its previous value and the lowest value ever recorded. The drop in value was compounded by the risk aversion due to the ongoing dispute in Greenland, along with foreign capital outflows and falling stock prices.

The rupee opened at 91.05 and lost 40 paise in interbank trading. On Tuesday, the rupee closed at a record high of 90.97 after reaching a low of 91.05 during intraday trading, with support from the Reserve Bank of India (RBI).

Factors both globally and locally contributed to the continuing weakness of the rupee.

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Greenland Dispute Sparks Risk-Off Mood

The renewed interest by U.S. President Donald Trump to purchase Greenland had many investors worried about renewed trade war tensions, leading them to have less of an appetite for riskier assets. They are looking forward to the interview given by Trump at Davos for more clues. 

The S&P 500 dropped approximately 2% on Tuesday, and U.S. Treasuries were under pressure due to the "Sell America" sentiment. Within Asia, many currencies were mixed between soft risk appetite and a falling dollar.

Japanese bond sell-offs brought yields to historic highs, as investors worried about Japanese financial stability.

Domestic Markets Add Downward Pressure

Using trading volume data from the previous trading day, Foreign Institutional Investors sold stocks worth ₹2,938 crores on Tuesday. At the beginning of the trading session, Sensex fell 385 points to close at 81,795, while Nifty decreased 92 points to close at 25,141.

The lack of confidence generated from sluggish equities is exacerbated by the change in the USD index, decreasing by 0.05% to settle at USD 98.59, and the decline in Brent Crude prices by 1.11% to settle at USD 64.20 per barrel. RBI also continues to intervene in order to stabilise markets during extreme price movements and fluctuations.

Broader Context and Outlook

There is a high likelihood that the Indian rupee will retest the previous intraday lows of 91.14 that were set on December 16, as uncertainties continue to persist globally. If there is no intervention, we are likely to reach levels of 91.70-92, while the rupee has support at 90.30-90.50.