The Indian Rupee took a hit, reaching a record low of 84.30 against the US dollar as former President Donald Trump moves closer to securing another term in the White House. Wednesday’s drop of 21 paise marks a significant low, driven by the strengthened dollar and continuing foreign investment outflows from Indian markets. This currency fall highlights the impact of global political developments on India’s foreign exchange and market sentiment.
Dollar Surge and Investor Concerns
Forex experts suggest that the rise of the US dollar index, spurred by Trump’s likely victory, is putting pressure on the rupee. The dollar index, which measures the strength of the US currency against six major world currencies, was trading at 104.80 with an increase of 1.34%. The strength of the dollar impacts emerging markets like India, often leading to capital outflows as investors seek the stability of the dollar.
Market Highlights:
- Opening Rates: The rupee opened at 84.23 against the dollar.
- Day’s Range: The currency fluctuated between 84.15 to 84.31 before closing at 84.30.
- Tuesday’s Closing: It closed at 84.09 with a slight gain, up two paise against the dollar.
Expert Insights on Rupee’s Outlook
Anuj Chaudhary, a Research Analyst at Sharekhan by BNP Paribas, explained, “The ongoing rise in the dollar and withdrawals by Foreign Institutional Investors (FIIs) are contributing to the rupee’s current situation. However, factors such as falling global commodity prices could potentially offer some support.” Chaudhary also noted that any intervention from the Reserve Bank of India (RBI) could help stabilize the rupee at lower levels.
Fed Rate Cuts Anticipated
Market participants are now eyeing the US Federal Reserve’s upcoming policy announcement, with expectations that interest rate cuts could be on the horizon. It’s projected that rates may be reduced by up to 1% in 2025, which may further impact the rupee-dollar relationship as well as global investor sentiment.
Stock Market Movement
Despite the rupee’s slump, Indian equity markets performed well on Wednesday, showing resilience amid global uncertainty. The Sensex surged by 901.50 points, closing at 80,378.13, while the Nifty gained 270.75 points to finish at 24,484.05. However, FIIs remained net sellers in the Indian capital markets, offloading shares worth Rs 2,569.41 crore.
Oil and Commodities
Adding to the market dynamics, Brent crude oil prices saw a decline, down by 1.43% to $74.45 per barrel. Lower oil prices can sometimes offer relief to the Indian economy, as it reduces import costs, though the pressure on the rupee continues in light of a strong dollar.
Rupee’s Expected Range
As per expert analysis, the rupee is anticipated to trade within the range of 84.10 to 84.40 against the dollar in the short term. With Trump’s election impacting global market sentiment and a volatile dollar, investors are advised to keep a close watch on these developments.
