The Indian rupee touched a historic low of 96.14 against the US dollar on Thursday, marking its weakest level ever, before closing at a fresh closing low of 95.81. The currency's fall was driven by sustained dollar demand from importers and foreign fund outflows, amid global economic uncertainties.
Rupee's Record Decline
On Thursday, the rupee opened weaker and continued to slide, breaching the 96 mark for the first time. It hit an intraday low of 96.14, surpassing its previous record low of 95.96 touched earlier this week. The currency managed to recover some ground later in the session, settling at 95.81, down 17 paise from the previous close of 95.64. This is the lowest closing level for the rupee against the US dollar.
Factors Behind the Fall
Several factors contributed to the rupee's weakness. The US dollar strengthened globally as the Federal Reserve maintained a hawkish stance on interest rates. Additionally, rising crude oil prices put pressure on India's import bill, increasing demand for dollars. Foreign portfolio investors continued to pull out funds from Indian equities, adding to the downward pressure on the rupee.
Market Reactions
The Reserve Bank of India (RBI) is believed to have intervened in the forex market to curb excessive volatility, but its actions were insufficient to prevent the rupee from hitting new lows. Traders expect the rupee to remain under pressure in the near term, with the possibility of further depreciation if global conditions worsen.
Impact on Economy
A weaker rupee makes imports more expensive, potentially fueling inflation. It also increases the cost of foreign debt servicing for Indian companies. However, exporters may benefit from improved competitiveness. The government and RBI are closely monitoring the situation and may take additional measures to stabilize the currency.
The rupee has been on a declining trend for several months, losing over 10% of its value against the dollar this year. Analysts predict that the currency may test the 97 level in the coming weeks if the dollar continues to strengthen and capital outflows persist.
