The Indian Rupee experienced a notable depreciation on Tuesday, shedding 12 paise to close at a provisional all-time low of 88.80 against the U.S. dollar. This decline was primarily influenced by a downturn in domestic stock markets and a strengthening American currency overnight.
Forex market participants noted that a ‘risk-off’ sentiment globally, coupled with outflows of foreign funds, further dampened investor confidence in the local currency.
However, some factors provided a degree of support, preventing a steeper fall. A decrease in global crude oil prices and reports of intervention from the Reserve Bank of India (RBI) helped stabilize the rupee.
Trading on the interbank foreign exchange began with the rupee at 88.73 against the greenback. It touched an intraday low of 88.81 before recovering slightly to 88.73, eventually settling at 88.80. This represents a 12-paise drop from its previous close of 88.68.
It’s worth noting that the rupee had previously hit this historic low of 88.80 against the U.S. dollar on September 30.
Concurrently, the dollar index, which measures the U.S. dollar’s performance against a basket of six major currencies, saw a modest increase of 0.10%, trading at 99.36.
In the commodities market, Brent crude, a key global oil benchmark, traded 2.15% lower at $61.99 per barrel in futures trading.
According to market analysts, one significant factor weighing on investor sentiment is the ongoing issue of U.S.-India trade tariffs.
Officials from India are scheduled to visit the U.S. this week for trade discussions. A senior official stated on Monday that negotiations for the proposed bilateral trade agreement are making good progress.
Earlier this year, in February, leaders from both nations instructed their respective officials to negotiate a Bilateral Trade Agreement (BTA). The initial phase of this pact was slated for completion by the fall of 2025 (October-November), with five rounds of negotiations already concluded.
Anuj Choudhary, a research analyst in currency and commodities at Mirae Asset ShareKhan, commented on the outlook: “A softer trend in global crude oil prices and foreign institutional investor (FII) inflows might benefit the rupee. Additionally, the potential for a U.S. government shutdown and increasing likelihood of a rate cut by the U.S. Federal Reserve could put further downward pressure on the U.S. Dollar. The USD/INR spot price is anticipated to trade within a range of 88.50 to 89.”
On the domestic economic front, India witnessed positive macroeconomic data. The Consumer Price Index (CPI) inflation eased to an 8-year low of 1.54% in September, down from 2.07% in August, falling below the RBI’s target of 2%.
Wholesale Price Index (WPI) inflation also cooled to 0.13% in September, compared to 0.52% in August.
In the domestic equity markets, the Sensex dipped 297.07 points, closing at 82,029.98, while the Nifty declined by 81.85 points to end the day at 25,145.50.
According to exchange data, Foreign Institutional Investors (FIIs) sold equities worth ₹240.10 crore on Monday, contributing to the domestic market’s subdued performance.