The Indian rupee depreciated to a record low of 95.73 against the US dollar on Thursday, marking its weakest closing level ever. The previous record low was 95.63, touched earlier this month.
Factors Behind the Decline
Forex traders attributed the rupee's fall to persistent strength in the US dollar and growing concerns over domestic inflation. The dollar index, which measures the greenback against six major currencies, remained elevated near multi-year highs, putting pressure on emerging market currencies.
Inflation Worries
India's retail inflation data for April, released earlier this week, showed consumer prices rising at a faster-than-expected pace. This has fueled speculation that the Reserve Bank of India may need to tighten monetary policy further, though higher interest rates could also weigh on economic growth.
Global Factors
On the global front, the US dollar strengthened as traders priced in a more aggressive rate hike trajectory by the Federal Reserve. Additionally, geopolitical tensions and risk aversion in global markets have supported demand for safe-haven assets like the dollar.
Market Outlook
Analysts expect the rupee to trade with a negative bias in the near term. The currency may test the 96-level in the coming sessions if the dollar continues to rally and domestic inflation remains elevated. However, any intervention by the RBI through dollar sales could provide some support.
- The rupee opened at 95.65 and moved in a range of 95.60 to 95.75 during the session.
- The domestic equity markets also ended lower, with the BSE Sensex falling 0.5%.
- Brent crude oil prices remained above $110 per barrel, adding to India's import bill concerns.
Market participants will now watch for any policy measures from the government or RBI to stem the rupee's slide. The next major trigger will be the US Federal Reserve's meeting minutes, due next week.
