On Friday, the Indian rupee dropped by 5 paise, hitting a historic low of 84.37 against the US dollar in early trading, impacted by ongoing foreign fund withdrawals and a sluggish trend in domestic equities. Forex experts noted that recent rate cuts by the US Federal Reserve indicate a shift in the global financial environment. Additionally, policies from former President Donald Trump concerning taxes and trade continue to affect global markets, adding potential volatility to the rupee’s outlook.
At the interbank foreign exchange market, the rupee initially opened at 84.32 against the dollar, before falling further to 84.37. This marked a 5-paise drop from the previous close, following a 1-paise decline on Thursday that closed at 84.32.
“The focus now shifts to the Reserve Bank of India (RBI) and its approach to managing this changing currency landscape. In such a fast-evolving market, only those who adapt quickly will find success,” said Amit Pabari, Managing Director of CR Forex Advisors.
The US Fed recently reduced its benchmark rate by 0.25 percentage points to a target range of 4.5%-4.75%, accompanied by a cautious tone, balancing inflation and employment risks.
Meanwhile, the dollar index, which measures the dollar’s strength against a basket of six major currencies, saw a slight rise of 0.02% to 104.53. Brent crude, the global oil benchmark, dropped by 0.65% to $75.14 per barrel in futures trading.
Pabari added, “In this fluid environment, we anticipate volatility in the USD/INR pair, with the RBI likely keeping it within a range of 83.80 to 84.50. Should the dollar’s strength slow down amid future Fed rate cuts and investor concerns, the rupee may trend towards the lower end of this range.”
On the domestic front, Sensex declined slightly by 14.23 points, or 0.02%, to 79,527.56, while the Nifty dropped by 15.45 points, or 0.06%, to 24,183.90. Foreign Institutional Investors (FIIs) were net sellers on Thursday, offloading shares worth ₹4,888.77 crore, according to exchange data.