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Indian Rupee Plunges to Record Low Against U.S. Dollar Amid Global Pressures

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The Indian rupee hit a record low against the U.S. dollar on Monday, driven by persistent demand for the dollar and continued outflows from Indian equities. The rupee dropped to an all-time low of 84.0725 against the U.S. dollar, surpassing the previous low of 84.07 recorded last Friday. This downward trend is attributed to foreign banks’ dollar bids and sustained outflows of over $8 billion from local equities in just 10 sessions.

For over two months, the Reserve Bank of India (RBI) tried to keep the rupee stable around the 84 mark. However, the ongoing sell-off by foreign investors and weakness in Asian currencies—exacerbated by disappointment over China’s economic stimulus measures—further pressured the rupee. Asian currencies were down by 0.1% to 0.3%, while the U.S. dollar index hovered near its two-month peak at 103.

Local banks were seen offering dollars, while larger foreign banks dominated the demand. Market analysts predict the rupee to trade between 83.95 and 84.20 in the near term. Amit Pabari, managing director of FX advisory firm CR Forex, pointed out that RBI’s interventions, along with a potential reduction in equity outflows, could provide the rupee some relief and help it recover.

Market Impact and Geopolitical Concerns

Brent crude oil prices—currently at $78 per barrel but up 9% in October—are being closely monitored, as rising tensions in the Middle East could further disrupt global oil supplies and impact the rupee. The Indian stock market also felt the ripple effects, with the BSE Sensex plunging by 564.51 points to 72,835.27 and the NSE Nifty falling 153.35 points to 22,119.15 in early trading. The geopolitical uncertainty triggered broad sell-offs across sectors, affecting investor sentiment.

The situation highlights the importance of sound financial planning and risk management, especially in volatile global markets. Investors are advised to consider profit-booking and exercise caution amid ongoing market corrections.

Last time, in June 2018, the Indian currency hit an all-time closing low of 68.79 against the dollar. However, the current situation presents more serious challenges due to global economic uncertainties, especially regarding oil prices and geopolitical tensions.

Indian Rupee Hits Historic Low of Rs.84 Per Dollar Amid Crude Oil Surge and Geopolitical Tensions

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The Indian rupee recently reached a historic low, falling by 0.12 to trade at 84.09 against the US dollar. This decline is largely attributed to surging crude oil prices and escalating geopolitical tensions in the Middle East. The US dollar’s strength, with the dollar index rising from $100.50 to $102.40, has also added pressure on the rupee.

Experts predict that ongoing volatility in the Middle East will keep oil prices elevated, weakening the rupee further in the short term. Brent crude has surged to $78.92 per barrel, up from nearly $69 on September 30, driven by fears of potential supply disruptions due to the conflict.

The rupee’s decline has also been fueled by significant outflows from foreign portfolio investors (FPIs), who sold shares worth ₹55,000 crore in the Indian stock market over the past nine days. Jateen Trivedi of LKP Securities noted that continued foreign institutional investor (FII) outflows have exacerbated the rupee’s weakness, with further declines possible.

Impact on Gold Prices and Global Markets

Gold prices have remained strong, trading above $2,635 on Comex, and increased by over ₹400 to ₹75,750 on the Multi Commodity Exchange (MCX). Rising jobless claims and persistent inflation, driven by higher crude oil prices, have supported the positive trend.

In India’s national capital, gold prices surged by ₹1,150 to ₹78,500 per 10 grams, driven by fresh buying from jewellers and global market trends. Increased local demand, along with global factors, contributed to the rise.

Geopolitical tensions in the Middle East have also impacted global financial markets. Israeli stocks fell sharply, with the benchmark TA-35 Index dropping 3.1% before a slight recovery. The selloff extended to Egypt, as investors offloaded assets amid rising uncertainty.

Fed Reserve’s Interest Rate Outlook

Meanwhile, the US Federal Reserve has signaled confidence in cutting interest rates, with Chairman Jerome Powell suggesting that policy adjustments are likely. The Fed’s move is influenced by inflation nearing its 2% target, leading to expectations of rate cuts designed to stimulate economic growth by lowering borrowing costs.

A reduction in US interest rates could have far-reaching effects on the global economy. A weaker dollar might make US exports more competitive and affect exchange rates globally, potentially encouraging investment in riskier assets and emerging markets. However, lingering global uncertainties or a US economic slowdown could dampen global growth prospects.

Breaking: Indian Rupee hits 81 per US dollar

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Though expected a little later, Indian rupee has plunged to its lowest today touching Rs.81 per US dollar, amid gloomy prospects of markets around the world in view of a steep rise in interest rates by the US Federal reserve by 0.75 percentage points, vowing to further hike in the future.

On Thursday, experts expected the Indian rupee to hit 82 levels in a month’s time but it has been precipitated on Friday to Rs. 80.71 and per US dollar by afternoon, it plummeted to Rs.81 level.

In fact, since August, the Indian rupee has been touching Rs.80 level before trying to emerge stronger against the American dollar.

Indian Rupee to Touch 70 Per US$ in 2017: Reuters Poll

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After demonetisation, all calculations and projections have been turning red and even on forex front, the Indian rupee is seen dwindling further in value to about 70 per US dollar in 2017, said a poll-based survey by Reuters.

“The rupee is expected to fall further against the US dollar this year to a record low, hit by rising global bond yields and an economic blow from New Delhi’s dramatic currency crackdown launched two months ago,” said the Reuters poll.

“It is expected to fall further to 69.50 by year-end. That 12-month consensus is the weakest for several years and would mark a record low,” it said. Quoting a poll conducted three months ago, Reuters Polling team said three months back the view in a Reuters poll was for the rupee to trade at 67.73 in 2017.

In the year 2016, the rupee remained stronger with variance at below 2 percent, which was better than most of the regional peers making the India’s economy the fastest-growing in Asia. But the election of Donald Trump in the US presidential election and the effect of demonetisation by Indian Prime Minister Narendra Modi have reversed the expections, said the report.

“We see a less rosy scenario in the capital account and current account front in the coming two years, with global bond yields and money flowing back to the US,” said Bhupesh Bameta, head of FX research at Edelweiss Financial Services in Mumbai, participating in the poll.

Since demonetization has roughed up many savings avenues, the attraction for gold may come back again, he added.