Mumbai: In a notable shift within the foreign exchange market, the Indian rupee fell by 14 paise, reaching an unprecedented low of 84.23 against the US dollar during early trade on Wednesday. This decline has been attributed to ongoing foreign fund outflows and the robust performance of the American currency in international markets. Forex traders have noted that the current market turbulence is largely influenced by the ongoing US elections, which have introduced a wave of volatility. Analysts anticipate that market conditions may stabilize once a clear victor emerges from this closely contested electoral battle. Furthermore, expectations are building around an impending rate cut by the US Federal Reserve, with projections suggesting possible reductions of up to 100 basis points by 2025.
Such monetary policy adjustments are likely to impact global currency trends, including that of the Indian rupee. At the interbank foreign exchange market, the rupee opened at its all-time low of 84.23 against the dollar, reflecting a decline of 14 paise from the previous trading session. On Tuesday, the rupee had managed to close slightly higher at 84.09. Contributing to this situation, the dollar index which measures the strength of the greenback against a basket of six major currencies was recorded at 105.11, marking a significant increase of 1.64 percent. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, indicated that the dollar index's rise was influenced by initial election results favoring former President Donald Trump, who appeared to gain ground in both the Senate and the House races.
In terms of global markets, Brent crude, the benchmark for oil prices, fell by 0.98 percent to USD 74.79 per barrel in futures trade, potentially influencing economic factors tied to India’s trade dynamics. Market analysts suggest that the Reserve Bank of India (RBI) will play a crucial role in determining the rupee's trajectory amid the unfolding electoral results. Bhansali commented, "All will depend on RBI as to where it will allow the rupee to open and how it will move depending on intra-day election results. A wide range for the rupee would be 84.00 to 84.35."
On the domestic equity front, the Sensex gained 390.93 points, or 0.49 percent, closing at 79,867.56 points, while the Nifty surged by 135.60 points, or 0.56 percent, to reach 24,348.90 points. The sell-off by foreign institutional investors (FIIs) was evident on Tuesday, as they offloaded shares worth Rs 2,569.41 crore, according to exchange data, adding another layer of complexity to the current economic landscape. As markets navigate these uncertain waters, stakeholders remain vigilant, watching for shifts that could signal a return to stability in the currency exchange rates and overall economic environment.
