MUMBAI: A Slight Decline in Rupee's Value

The Indian rupee experienced a minor setback, dropping 5 paise to 85.69 against the US dollar in the early trade of Wednesday, marking the first session of 2025. This decline is attributed to the robust performance of the American currency in the overseas market and continuous foreign fund outflows, which have put pressure on the local unit.

Forex experts point out that the dollar index (DXY) and US 10-year bond yields have been on an upward trajectory, largely due to the Federal Reserve's cautious approach and the influence of the "Trump factor". Additionally, global markets are anticipated to witness lower volumes as the holiday season is in full swing in major economies such as the UK and Europe.

Market Movements and Predictions

At the interbank foreign exchange, the rupee commenced trading at 85.63 and subsequently fell to 85.69 against the US dollar, marking a 5 paise drop from its previous close. This follows a 12 paise depreciation on Tuesday, closing at a new all-time low of 85.64 against the US dollar.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, mentioned that the Indian rupee was safeguarded by the Reserve Bank of India (RBI) at 85.6450 on Tuesday. Bhansali suggests that with US markets closed on Wednesday, the absence of cash dollar demand could present an opportunity for importers to purchase dollars for their payables, with the day's range expected between 85.40 to 85.70.

Global and Domestic Indicators

Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, stood at 104.48. Brent crude futures, the global oil benchmark, were trading at USD 74.64 per barrel.

In the domestic equity market, the 30-share BSE Sensex was down by 127.91 points or 0.16% at 78,011.10 points in morning trade, while Nifty dropped 36.30 points or 0.15% to 23,608.50 points. Foreign Institutional Investors (FIIs) were net sellers, offloading Rs 4,645.22 crore in the capital markets on Tuesday, as per exchange data.

On the domestic macroeconomic front, the Centre's fiscal deficit at the end of the eighth month of the financial year 2024-25 reached 52.5% of the full-year target, according to government data released on Tuesday. In absolute terms, the fiscal deficit—the gap between the government's expenditure and revenue—was approximately Rs 8.47 lakh crore during the April-November period, as per the data released by the Controller General of Accounts (CGA).