Rupee's Record Slide Against Dollar Continues

The Indian rupee has once again marked a historic low against the US dollar, closing at 85.26 on Thursday. This marks the third consecutive session of decline, with the currency hitting an intraday low of 85.28. The persistent demand for dollars over rupees in the year-end trades has significantly contributed to this downturn.

Market Sentiments and Future Projections

"The rupee weakened marginally as the dollar index remained elevated near the 108 level. Foreign institutional investors continued to stay cautious, refraining from taking long positions in Indian markets, which kept the rupee subdued. The currency faces challenges in regaining stability, sliding over hurdles while attempting to recover lost ground. In the near term, the rupee is expected to trade within a range of 85-85.45," Jateen Trivedi, VP (research analyst) at LKP Securities, said.

Global Influences on the Rupee

The dollar has gained over the rupee in the past two months. The publication in RBI's Bulletin of the real effective exchange rate hitting a multi-year high of 108.14 raised concerns of overvaluation. The Real Effective Exchange Rate is an index that tracks how the rupee's value compares to other currencies by looking at how they move against the dollar. It has increased because other currencies have weakened less than the rupee.

Looking Ahead

Dealers say that the rupee could face further downward pressure as global economic uncertainties and domestic macroeconomic challenges continue to weigh on market sentiment. RBI's interventions are expected to provide some support, but sustained dollar strength poses significant challenges for the rupee in the coming months. The dollar has strengthened on the back of rising bond yields in the US and expectations that the Federal Reserve will introduce its interest rate cuts more slowly in 2025. On Thursday, the sensex closed nearly flat at 78,472 points, while Nifty ended slightly higher at 23,750.