Rupee falls 7 paise to close at all-time low of 84.46 against US dollar

Mumbai: The rupee depreciated by 7 paise to close at an all-time low of 84.46 against the US dollar on Thursday, weighed down by unabated foreign fund outflows and strong dollar demand from investors.

Forex traders said the downward pressure on the USD/INR pair is largely driven by persistent inflation and significant foreign fund outflows.

At the interbank foreign exchange, the rupee opened at 84.40 against the US dollar. During the session, the local currency touched a high of 84.39 and a low of 84.47. It finally settled at its fresh all-time low of 84.46 against the greenback, 7 paise lower than its previous close.

On Wednesday, the rupee moved in a narrow range and settled flat at 84.39 against the US dollar.

"The US dollar index has hit a fresh cycle high of 106.76 as it approaches the stiff resistance at 107.50," said Praveen Singh - Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas.

"There was no respite on the US inflation front as the data released yesterday showed that the US core consumer price index increased 0.3 per cent for a third month. It was up 3.3 per cent on a year-on-year basis," Singh said.

Anil Kumar Bhansali, head of Treasury and executive director Finrex Treasury Advisors LLP, said the rupee's fall was held by the RBI which continued to sell dollars.

"The rupee is expected to remain weak but protected by RBI between 84.30 to 84.60 during the next week and is expected to weaken towards 85.00 by possibly December as Trump trades continue to ensure sell off of assets," he added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.30 per cent at 106.80.

Brent crude, the global oil benchmark, rose 0.03 per cent to USD 72.30 per barrel in futures trade.

Forex traders said the USD-INR pair may touch Rs 85 level in near-term, though the intervention by the Reserve Bank of India (RBI) may slow the pace.

On the global front, China's recent 1.4 trillion yuan stimulus, coupled with expectations of more fiscal support, has strengthened Chinese markets and added downward pressure on Indian assets, traders said.

Moreover, India's inflation surge is putting additional pressure on the currency.

Wholesale price inflation rose to a 4-month high of 2.36 per cent in October as prices of food items, especially vegetables, and manufactured goods turned dearer, according to government data released on Thursday.

Retail inflation breached the RBI's upper tolerance level, soaring to a 14-month high of 6.21 per cent in October mainly on account of rising food prices.

In the domestic equity market, the 30-share BSE Sensex fell 110.64 points, or 0.14 per cent, to close at 77,580.31 points, while Nifty fell 26.35 points, or 0.11 per cent, to settle at 23,532.70 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 1,849.87 crore, according to exchange data.

The latest government data released on Thursday showed India's merchandise exports in October rose by an impressive 17.25 per cent year-on-year, highest in over two years, to USD 39.2 billion, while the trade deficit widened to USD 27.14 billion on a sequential basis.

Meanwhile, Reserve Bank Governor Shaktikanta Das on Thursday said the Indian economy has been sailing "smoothly" amid the global headwinds.

Speaking at an event, he said that the country has the fourth largest forex reserves in the world. The forex reserves, which stood at USD 682 billion as of October 31, are sufficient to cover the entire external debt and a year's import payments, he added.

The governor also made it clear that the RBI does not target a rate for the rupee, and the fore interventions are for ensuring orderly movement and curbing volatility in the currency.

"If the Indian rupee has remained relatively stable despite severe external shocks, including the largest and the steepest tightening by the US Fed in 2022 and 2023, it speaks volumes about the sea change in our macro fundamentals from the days of the taper tantrum," Das said.