The Indian rupee has reached an all-time low, falling to 85.84 against the US dollar on Monday, surpassing its previous record of 85.81 set in late December. The currency ended the day at 85.83, marking a decline of six paise from the previous close of 85.77. This dip in the rupee is attributed to a stronger dollar, sluggish capital flows, and negative sentiment in the equity markets. Despite the Reserve Bank of India’s (RBI) efforts to stabilize the currency by selling dollars, the rupee remains under pressure.
Traders believe that the RBI may be attempting to hold the rupee steady until the new US administration provides more clarity on its stance on tariffs. Meanwhile, the dollar index, which tracks the US dollar against six major currencies, fell 0.3% to 108.5 after hitting a two-year high. Despite initial losses, the dollar regained strength following remarks from Federal Reserve Governor Lisa Cook, who indicated a cautious stance on rate cuts due to ongoing inflation concerns, providing additional support to the dollar.
In parallel, the equity markets have faced significant declines, with the Sensex dropping 1,258 points (1.6%) to 77,965 and the Nifty falling 389 points (1.6%) to 23,616. Foreign investors have pulled $1.1 billion from Indian stocks and bonds so far in January, further reflecting the weak market sentiment.
