Dollar vs Rupee: Big fall in Rupee against US Dollar, Rupee falls by 58 paise to all time low

Mumbai: The rupee witnessed a huge fall on Monday amid the strengthening of the American currency and rise in crude oil prices. The rupee closed at a new record low of 86.62 (provisional) against the dollar, the biggest single-day fall of 58 paise in two years. In the interbank foreign exchange market, the rupee opened at 86.12 and reached 86.11 once during trading. But most of the time it remained in the negative zone. At the close of trade, the rupee fell by 58 paise to close at its all-time low of 86.62 (provisional). This is the biggest fall in the value of the rupee against the dollar in two years in a single trading session.

Before this, on February 6, 2023, there was a huge fall of 68 paise in the rupee. In the last two weeks, there has been a general declining trend in the rupee. The rupee has seen a major decline of more than one rupee in the last two weeks since closing at 85.52 on December 30. The rupee crossed 85 per dollar for the first time on December 19, 2024. On Friday, the last trading day, the rupee had closed at 86.04 per dollar.

Why did the rupee fall against the dollar?

The reason for this huge fall in the value of rupee against the American currency has been the continuously increasing demand for dollars and the withdrawal of foreign investors from the Indian markets. Foreign institutional investors (FIIs) had sold shares worth Rs 2,254.68 crore on Friday. According to stock market data, so far this month, foreign investors have withdrawn about Rs 22,194 crore from Indian shares. According to analysts, the Reserve Bank of India (RBI) has allowed the rupee to fall against the US dollar amid softening of foreign exchange reserves and decline in the currencies of emerging markets.

Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP, said the RBI will allow weakness in the rupee as demand for the dollar is increasing and supply is decreasing. RBI had said on Friday that the country's foreign exchange reserves declined by $ 5.69 billion to $ 634.58 billion in the week ending January 3.

Dollar strong due to better employment data in America

According to analysts, during the same period, the dollar strengthened due to better than expected employment data in the US market, due to which US bond rewards also increased. Apart from this, America has imposed new sanctions on Russia, due to which the international oil standard Brent crude has reached close to $ 81 per barrel. Investors are already cautious in anticipation of restrictive trade measures if the new administration of President-elect Donald Trump comes into power.

Pressure on rupee due to rising crude oil prices

Rupee hits new low due to strong dollar and weak global markets. FIIs remain net sellers while crude oil prices have increased by about two percent. Chaudhary said rising crude oil prices and risk aversion in global markets could put further pressure on the rupee. He said that the spot price of dollar-rupee is expected to be in the range of 86.25 to 86.80.

Anuj Chaudhary, Research Analyst, Mirae Asset Sharekhan

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Huge decline in domestic stock market

Meanwhile, the dollar index, which measures the dollar's strength against six major world currencies, was trading 0.29 per cent higher at its two-year high of 109.80. The yield on US bonds increased by 0.48 percent to the level of October 2023 at 4.79 percent. Global oil benchmark Brent crude rose 1.12 percent to $80.65 a barrel in futures trade. At the same time, domestically, BSE Sensex fell by 1,048.90 points or 1.36 percent to 76,330.01 points and NSE Nifty closed at 23,085.95 points with a loss of 345.55 points or 1.47 percent.