Rupee falls four paise to close at record low of 85.79 against U.S. dollar

Rupee hits record low against dollar due to strong demand, U.S. economy outperformance, and expectations of fewer rate cuts.

The Rupee depreciated four paise to close at a record low of 85.79 (provisional) against the U.S. dollar on Friday (January 3, 2025), as strong dollar demand from importers and a muted trend in domestic equities weighed on investors' sentiments.

Forex traders said the dollar gained against most currencies during 2024 and continued to remain on a strong footing this year.

The U.S. dollar index breached the crucial 109-mark. The uptrend in the American currency was underpinned by expectations of fewer rate cuts and a view that the U.S. economy will continue to outperform its peers globally.

At the interbank foreign exchange, the Rupee opened on a weak note and sank to an intra-day low of 85.80 and its high of 85.73 against the American currency. “The local unit settled for the day at a record low of 85.79 (provisional), registering a fall of four paise over its previous close. Reports of RBI selling U.S. dollars supported the Rupee at lower levels,” traders said.

On Thursday (January 2, 2025), the Rupee depreciated 11 paise to close at a record low of 85.75 against the dollar. On December 27, 2024, the local currency touched its lifetime intra-day low of 85.80 against the greenback.

Traders said the market will keep its focus on U.S. President-elect Donald Trump's policies, which could boost growth but might also increase price pressures and this would keep the U.S. Fed on hold for longer on interest rate cuts.

“We expect the Rupee to trade with a negative bias on a strong U.S. dollar and demand for Dollar from importers. FII outflows may also put pressure on the Rupee. However, any further intervention by the RBI may support rupee at lower levels,” Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said. “USD-INR spot price is expected to trade in a range of 85.60-86.00,” Mr. Choudhary added.