Rupee hits lifetime low of 85.97 vs USD amid persistent FII outflows, rising crude oil prices

Rupee

Indian rupee hit record low at closing on January 10 due to persistent FII outflows from Indian equities, strong dollar demand from oil importers after surge in Brent crude oil prices, and rising US treasury yields, currency experts said.

According to the Bloomberg data, the local currency closed at 85.9728 against the US dollar, as compared to 85.8788 at open and 85.8638 close on the previous trading session against the greenback.

Today, Indian rupee traded in the range of 85.8638 and 85.9750 against the US dollar.

“Rupee closed at its weakest as risk aversion was the name of the game with dollar and JPY getting bought and other currencies, equities getting sold off, with a higher Brent oil above $78.60 per barrel, on expectation of a stronger Non Farm Pay Roll data from US and FPIs in the buying mode of dollar along with oil companies,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP said earlier.

Demand for dollar has surged from oil importers and foreign investors, which has impacted a rupee a lot, a currency experts said. The increase in demand was attributed to rising Brent crude oil prices in past few days.

Brent crude oil prices, today, were trading at $78.83 per barrel, up $1.91 or 2.48 percent. The surge in demand for crude oil was due to colder weather than the last two winters, in Europe and the United States. There is also a concern that last-minute sanctions against Russia from the Biden administration could further affect supply in a negative way.

Further, domestic equities ending in red also pose pressure on the local currency. The Sensex ended down 241.30 points or 0.31 percent at 77,378.91, and the Nifty closed down 95 points or 0.40 percent at 23,431.50.

“Markets continued its downward trajectory as rupee scaling new lows due to strengthening dollar has further dampened investors’ sentiment. Amid concerns of subdued economic growth and expectations of a slowdown in the quarterly earnings, investors cut their bet on banking and mid & small cap stocks,” said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.

Indian rupee has been under pressure since last few months due to various domestic as well as international factors. These include India’s sluggish growth, outflows by foreign investors from Indian equities, and the strengthening of the dollar index after Donald Trump announced tariff plans, among others.

In the last three months, the domestic currency has depreciated to 85.9738 against the US dollar on January 10, from 83.9688 on October 3, 2024.