Rupee drops lower, down 1 paisa at fresh all-time low of 84.39 against US dollar

The rupee fell 1 paisa to a new lifetime low of 84.39 (provisional) against the US dollar on Tuesday as persistent foreign fund outflows and a strengthening greenback against major crosses overseas dented investor sentiment.

Forex traders said the rupee is likely to trade between 83.80 and 84.50 in the medium term, with the Reserve Bank of India likely limiting any significant downside, aided by its robust foreign exchange reserves.

At the interbank foreign exchange, the rupee opened at 84.39 against the US dollar. During the session, the local currency touched a high of 84.39 and a low of 84.41. It finally settled at 84.40 (provisional), a decline of just 1 paisa against the US currency, registering a loss for the fifth straight session.

On Monday, the rupee dropped 1 paisa to hit a new lifetime low of 84.38 against the US dollar.

In the last five sessions, the local unit has lost 32 paise against the greenback.

"The rupee traded weaker as foreign funds continued their selling spree in the Indian market. However, the rupee received some relief from falling crude and gold prices, as the reduced pace of decline could potentially improve India's import bill in the coming months," said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

Despite this, the dollar index's continued strength above 105 is expected to maintain pressure on the rupee, limiting any significant recovery in the near term.

"With resistance near the 84.25-84.30 zone, support is seen lower at 84.55. This week's focus will be on the US CPI data release, which could influence the dollar's trajectory. Additionally, US Fed Chairperson Jerome Powell's upcoming speech is expected to provide insights that may drive price action in the dollar, currently trading at a four-month high of 105.75," Trivedi said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.06 per cent higher at 105.60.

Brent crude, the global oil benchmark, rose 0.60 per cent to $72.26 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex fell 820.97 points, or 1.03 per cent, to close at 78,675.18 points, while Nifty fell 257.85 points, or 1.07 per cent, to settle at 23,883.45 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth ₹2,306.88 crore, according to exchange data.

Meanwhile, an SBI research report on Monday said the rupee may depreciate 8-10 per cent against the US dollar during the Trump 2.0 regime.

The report, titled US Presidential Election 2024: How Trump 2.0 Impacts India’s and the Global Economy, emphasised that the rupee can have a brief spell of depreciation against the US dollar, followed by appreciation.