The rupee slumped again on Thursday, declining 36 paise to close for the day at an all-time low of 88.47 (provisional) against the US dollar amid continuing trade tensions between India and the US that have weighed heavily on the domestic currency’s vulnerability.
Persistent foreign fund outflows along with a recovery in the US dollar, clubbed with anticipation of inflation data further dented investors’ sentiment, say forex traders. While dialogue between India and the US seemed to have renewed after US President Donald Trump gave positive signals about the India-US trade treaty, dollar demand and global factors ensured the situation remains fragile.
Worsening political climate, especially after Israel’s attack on Qatar further upped crude oil prices, putting additional pressure on the rupee.
At the interbank foreign exchange, the domestic unit opened at 88.11 and fell to an all-time low of 88.47 against the US dollar in intraday trade. The rupee finally settled for the day at a record low of 88.47 (provisional), registering a sharp decline of 36 paise over its previous close.
On Wednesday, the domestic unit had recovered slightly from its record low level and ended with a gain of 4 paise at 88.11 against the US dollar.
Also Read: Rupee pares initial gains, closes 3 paise lower
On September 5, the rupee touched the lowest-ever intraday level of 88.38, but pared all losses before ending at ₹88.09 against the US dollar. The unit had recorded its all-time low closing level of 88.15 against the dollar on September 2.
Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, acknowledged the rupee is facing its worst pressures and touching historic lows.
"The Indian rupee is trading near historic lows, facing pressure from strong import dollar demand, external tariff concerns and market anticipation of US inflation data and FED Reserve policy," he said.
Bhansali said he does not expect the rupee to recover phenomenally any time soon.
“The dollar index was also up touching almost 98 levels, while Brent oil prices also were up keeping the dollar bids on the higher side. The premiums were also indicating higher due to increase in interest rate differential between India and US in the last three days. The rupee is expected to be in the range of 88.25 to 88.75 on Friday,” he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.22 per cent to 97.99.
Brent crude, the global oil benchmark, was trading 0.25 per cent lower at USD 67.32 per barrel in futures trade.
Anuj Choudhary, Research Analyst, Currency and commodities, Mirae Asset ShareKhan, expects positive domestic equities and renewed negotiations on trade between India and the US to support the rupee at lower levels.
"We expect the rupee to trade with a negative bias amid a recovery in the US dollar index and persistent FII outflows. Dollar demand from importers and ongoing tariff issues between India and US may also pressurise the rupee. However, positive domestic equities and renewed negotiations between India and US may support rupee at lower levels," he said.
On the domestic equity market front, Sensex climbed 123.58 points to settle at 81,548.73, while the Nifty advanced 32.40 points to 25,005.50.
Foreign Institutional Investors offloaded equities worth ₹115.69 crore on Wednesday, according to exchange data.
Meanwhile, India and the US are natural partners and teams from both sides are working to conclude negotiations on a bilateral trade deal, Prime Minister Narendra Modi said on Wednesday in response to US President Donald Trump's remarks that efforts are on to address "trade barriers" between the two countries.
The exchange between the two leaders on social media is largely seen as part of efforts by both New Delhi and Washington to reset ties that witnessed increasing stress in the last few weeks after Trump doubled tariffs on Indian goods.
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