The Indian rupee depreciated by 32 paise to close at an all-time low of 95.20 against the US dollar on Monday, marking its weakest level ever. The decline was attributed to strong demand for the greenback from importers and banks, coupled with a sell-off in domestic equity markets.
Factors Behind the Fall
Forex traders noted that the rupee opened weak and continued to slide throughout the day as the dollar index remained elevated. Additionally, foreign fund outflows and concerns over global economic growth weighed on investor sentiment. The rupee had closed at 94.88 on the previous trading session.
Market Impact
The domestic equity markets also witnessed a sharp decline, with the BSE Sensex falling over 500 points and the NSE Nifty slipping below the 24,000 mark. The weakness in equities further pressured the rupee, as risk appetite diminished.
Meanwhile, the Reserve Bank of India (RBI) is likely to have intervened to prevent excessive volatility, but the currency still ended at a record low. Analysts expect the rupee to remain under pressure in the near term due to persistent dollar demand and global uncertainties.
Comparison with Previous Lows
The rupee had previously hit a low of 94.90 in October 2023 before recovering. The current decline surpasses that level, reflecting sustained pressure on the Indian currency. The dollar index, which measures the greenback against a basket of six major currencies, remained strong, hovering near 107 levels.
Outlook
Market participants are closely watching the US Federal Reserve's monetary policy stance and domestic inflation data for further cues. A stronger dollar and rising crude oil prices could add to the rupee's woes, potentially pushing it towards the 96 mark in the coming weeks.
In the interbank foreign exchange market, the rupee opened at 95.10 and touched an intraday low of 95.25 before closing at 95.20. The currency has depreciated by nearly 3% so far this year, making it one of the worst-performing Asian currencies.
