Mumbai: Rupee plunged 15 paise to its record low level of 87.58 against US dollar Thursday, as the speculation about a potential RBI rate cut in its upcoming monetary policy meeting weighed over the local currency.
The local unit has lost over 2 per cent so far this year. The sharp drop in the domestic unit comes after nearly a 3 per cent fall in the USD/INR pair in 2024, making it one of the worst-performing Asian currencies.
On January 1, 2024, the rupee was at 83.21 against the greenback.
Forex traders said the rupee is trading with a negative bias over the global trade war as market participants mulled the impact of tariffs being imposed by the United States and China.
Moreover, rate cut concerns by the Reserve Bank of India and the broad strength of the American currency in the overseas market dented investor sentiments further.
At the interbank foreign exchange, the rupee opened at 87.54 and slipped further to all-time low of 87.58 against the greenback in initial deals, a plunge of 15 paise from its previous close.
On Wednesday, the rupee plunged 36 paise to close at an all-time low of 87.43 against the US dollar.
The rupee has lost 194 paise so far this year. The domestic unit was quoted at 85.64 against the greenback January 1, 2025.
Forex traders said the Indian rupee is trading with a negative bias as foreign banks went on a dollar-buying spree and importers scrambled to secure dollars, as they feared further depreciation amidst global uncertainty.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.16 per cent higher at 107.74.
Brent crude, the global oil benchmark, rose 0.36 per cent to USD 74.88 per barrel in futures trade.
Additionally, weak PMI data signalled a slowdown in economic activity.
India’s services sector activity expanded at the slowest pace in over two years in January amid softer increases in sales and output. The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 59.3 in December to 56.5 in January — its lowest level since November 2022.
The Indian rupee made a record low as the market anticipated that RBI may slash interest rates February 7, 2025. Widespread stop-loss was triggered further exacerbating the currency weakness, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
“The rupee’s slide invoked investor concerns as significant dollar buying by foreign banks and oil companies contributed to the weakness,” Bhansali said, adding that the rupee is expected to be in the range of 87.30/60 with a close watch on the RBI.
The Monetary Policy Committee (MPC) of the Reserve bank of India (RBI) began its three-day meeting Wednesday. The MPC will announce its policy decisions February 7.
In the domestic equity market, the 30-share BSE Sensex was trading 383.20 points, or 0.49 per cent, lower at 77,888.08 points, while the Nifty was down 113.55 points, or 0.48 per cent, at 23,582.75 points.
Foreign institutional investors (FIIs) offloaded equities worth Rs 1,682.83 crore in the capital markets on a net basis Wednesday, according to exchange data.
