The Indian rupee weakened by 11 paise, reaching 85.75 against the US dollar in early trade, as the dollar index remained strong and foreign fund outflows dampened market sentiment. The outlook for the rupee remains under pressure with global markets experiencing lower trading volumes.
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The Indian rupee witnessed a drop of 11 paise, falling to 85.75 against the US dollar in early trading on Thursday, primarily due to a strong dollar index and higher US 10-year bond yields.
Forex traders attributed the rupee's decline to the sustained upward momentum of the dollar, which has strengthened against most global currencies throughout 2024 and continues to maintain a solid position into the new year. Additionally, ongoing foreign fund outflows have further dampened investor sentiment, adding pressure on the local currency.
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Global markets are expected to see low trading volumes in the near term, as major economies such as the UK and Europe are still in the holiday season. At the interbank foreign exchange, the rupee initially opened at 85.69 but slipped further to 85.75 against the greenback, marking an 11-paise drop compared to its previous close. On Wednesday, the rupee ended almost unchanged at 85.64 against the dollar.
The Indian currency reached its lifetime intraday low of 85.80 on December 27 against the US dollar, raising concerns about the strength of the rupee. Meanwhile, the dollar index, which measures the US dollar's performance against a basket of six major currencies, stood at 108.32, down by 0.15 percent. This index has remained well-supported, hovering around the 108 mark for the last few sessions.
Looking ahead, market experts are focusing on the potential impact of policies by US President Donald Trump, which could spur economic growth but also lead to higher price pressures. This scenario might prompt the US Federal Reserve to hold off on cutting interest rates for an extended period, according to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
"Today, the rupee is expected to trade within a range of 85.50 to 85.80, with attention on liquidity positions as near-term premiums remain elevated," Bhansali noted.
Brent crude, the global oil benchmark, was trading 0.44 percent higher at USD 74.97 per barrel in futures trade. On the domestic front, the 30-share BSE Sensex rose by 270.48 points, or 0.34 percent, to 78,777.89 points in early trade, while the Nifty gained 85.15 points, or 0.36 percent, to 23,828.05 points.
Foreign Institutional Investors (FIIs) continued to be net sellers, offloading Rs 1,782.71 crore in the capital markets on Wednesday, according to exchange data.
On the macroeconomic front, the Goods and Services Tax (GST) revenue for December rose by 7.3 percent, totalling Rs 1.77 lakh crore, compared to Rs 1.65 lakh crore in the same period last year. However, November's GST collection had been higher, standing at Rs 1.82 lakh crore, reflecting an 8.5 percent annual growth. The highest-ever GST collection was recorded in April 2024, at over Rs 2.10 lakh crore.
(With inputs from PTI)
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