Rupee slumps 27 paise to hit record low of 86.31 against US dollar in early trade

According to forex traders, a surge in crude oil prices, persistent foreign capital outflows, and a negative trend in domestic equity markets also added pressure on the rupee.

The rupee continued its decline on Monday, declining by 27 paise to hit a new lifetime low of 86.31 against the US dollar, marking the second consecutive session of losses. This slide was primarily driven by a strong US dollar, along with volatile global market conditions.

According to forex traders, a surge in crude oil prices, persistent foreign capital outflows, and a negative trend in domestic equity markets also added pressure on the rupee. The dollar’s strength was bolstered by better-than-expected job growth in the US, which led to a rise in benchmark US Treasury yields amid expectations that the Federal Reserve may slow its interest rate cuts.

At the interbank foreign exchange, the rupee opened at 86.12 but quickly fell to the historic low of 86.31 in early trading, registering a 27 paise loss from its previous close of 86.04 on Friday.

Meanwhile, Brent crude, the global oil benchmark, increased by 1.44 percent, reaching USD 80.91 per barrel in futures trade, adding to the inflationary pressures on the rupee.

In the domestic market, the BSE Sensex dropped 0.71 percent, losing 550.49 points to settle at 76,828.42 points, while the Nifty fell 0.78 percent, losing 182.45 points to 23,249.05 points. Foreign institutional investors (FIIs) offloaded Rs 2,254.68 crore from the capital markets on a net basis on Friday.

Additionally, the Reserve Bank of India (RBI) reported a drop in the country’s forex reserves, which declined by USD 5.693 billion, settling at USD 634.585 billion for the week ended January 3.

Despite these challenges, the latest government data revealed that industrial production (IIP) growth accelerated to 5.2 percent year-on-year in November 2024, driven by increased festive demand and a recovery in the manufacturing sector.

In other developments, the dollar index, which measures the US dollar's strength against a basket of six currencies, rose by 0.22 percent, reaching a two-year high of 109.72. The 10-year US bond yield remained elevated, touching 4.76 percent, its highest level since October 2023. On Friday, the dollar index surged to nearly 110, with the 10-year US yield climbing to a 14-month high.