Mumbai, Feb 3 (PTI) – The Indian rupee plunged 55 paise to hit a historic low of 87.17 against the US dollar on Monday, weighed down by global market uncertainties following new tariffs imposed by the Trump administration on Canada, Mexico, and China.
Forex traders noted that the rupee touched an intraday low of 87.29, driven by a surge in the US Dollar index and prevailing weakness in global markets. The dollar gained strength after the United States imposed 25% duties on imports from Canada and Mexico, and a 10% duty on Chinese goods, heightening fears of a broader trade war.
At the interbank foreign exchange, the rupee opened weak at 87.00 and continued to decline throughout the session before settling at 87.17, marking its lowest closing level. This sharp depreciation follows a flat closing of 86.62 on Friday.
Market Reaction and Outlook
Market analysts anticipate continued pressure on the rupee amid a strong dollar and persistent foreign fund outflows."We expect the rupee to trade with a negative bias due to a strong US Dollar and FII outflows, along with a weak domestic market trend. Concerns over the US tariffs may further weigh on the local currency," said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.
However, he added that intervention by the Reserve Bank of India (RBI) could provide some support. Traders are also expected to take cues from the US ISM manufacturing PMI data and remain cautious ahead of the RBI’s upcoming monetary policy meeting.
Key Market Indicators
- Dollar Index: Rose 1.01% to 109.46, reflecting the greenback’s strength against a basket of six major currencies.
- Brent Crude Prices: Increased 1.41% to $76.74 per barrel, adding pressure on import-dependent economies like India.
- Stock Market: The BSE Sensex fell 319.22 points (0.41%) to close at 77,186.74, while the NSE Nifty declined 121.10 points (0.52%) to settle at 23,361.05.
- FII Outflows: Foreign institutional investors (FIIs) offloaded equities worth ₹1,327.09 crore in the capital markets on Saturday, as per exchange data.
Forex Reserves and RBI’s Stance
India’s forex reserves saw a $5.574 billion increase to $629.557 billion for the week ending January 24, following a previous decline of $1.888 billion. The drop in reserves in earlier weeks has been linked to RBI’s forex market interventions to manage currency volatility.Despite the rupee’s decline, Finance Secretary Tuhin Kanta Pandey assured that there is no concern over its value, stating that the RBI is effectively managing the fluctuations.
"There is no concern about the rupee's value. The volatility is being handled by the RBI," Pandey told reporters. He emphasized that India follows a free-floating exchange rate system, with no fixed control on currency valuation.
Conclusion
The rupee’s fall to an all-time low underscores growing market volatility amid global trade tensions. With the US imposing fresh tariffs, a stronger dollar, and foreign fund outflows, traders will closely monitor RBI’s policy stance and global economic cues to assess the rupee’s trajectory in the coming weeks.
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