The Indian rupee weakened to a record low of 96.20 against the US dollar in early trading on Monday, surpassing its previous all-time low. The decline was attributed to sustained demand for the American currency from importers and banks, coupled with a negative trend in domestic equity markets.
Factors Behind the Fall
Forex traders noted that the rupee opened at 96.15 per dollar and slipped further to 96.20, breaching the earlier record of 96.10 touched last week. The dollar index, which gauges the greenback's strength against a basket of six major currencies, rose by 0.1% to 106.75, adding pressure on the rupee. Additionally, foreign fund outflows and uncertainty over global interest rates weighed on investor sentiment.
Market Impact
The benchmark BSE Sensex declined by 250 points or 0.35% to 71,800 in early trade, while the NSE Nifty50 slipped below the 21,650 mark. The sell-off in equities further dampened the rupee's outlook. Meanwhile, the Reserve Bank of India (RBI) is closely monitoring the situation, though no immediate intervention was reported.
Expert Views
Analysts believe that the rupee could face further depreciation if the dollar remains strong and crude oil prices stay elevated. India imports about 85% of its oil requirements, and higher crude prices widen the trade deficit, putting additional pressure on the currency. However, RBI's likely intervention through dollar sales may prevent sharp volatility.
Global Context
The rupee's decline aligns with a broader weakening of Asian currencies against the dollar, as the US Federal Reserve maintains a hawkish stance on interest rates. The Chinese yuan, Japanese yen, and South Korean won also traded lower on Monday. Market participants are now awaiting key US economic data for further cues.
Despite the record low, some analysts suggest that the rupee may stabilize around current levels if the RBI steps in aggressively. The central bank has been using its foreign exchange reserves to curb excessive volatility, with reserves standing at $624 billion as of the latest data.
