Mumbai, The rupee recovered from its all-time low level and settled for the day with gains of just 3 paise at 84.69 (provisional) against the US dollar in a range-bound trade on Tuesday, amid a positive trend in domestic equities. Forex traders said the rupee has been on a downtrend largely on the back of Donald Trump’s rhetoric on BRICS currency, political instability in the Eurozone, weaker domestic macroeconomic indicators and unabated foreign portfolio outflows.
US President-elect Trump on Saturday threatened a 100 per cent tariff on BRICS nations if they act to undermine the US dollar.
Moreover, market participants are also awaiting cues from the upcoming RBI monetary policy on December 6, which will likely focus on balancing inflation and growth.
At the interbank foreign exchange, the rupee opened at 84.75 and moved in a narrow range and touched an intra-day high of 84.64 and an all-time low of 84.76 against the greenback.
On Monday, the rupee depreciated 12 paise to close at an all-time low of 84.72 against the dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.18 per cent at 106.25.
Brent crude, the global oil benchmark, rose by 1.11 per cent to USD 72.63 per barrel in futures trade.
Meanwhile, Minister of State for Finance Pankaj Chaudhary on Monday said in Parliament that the rupee remains one of the best-performing Asian currencies despite geopolitical tensions in the Middle East and other headwinds, indicating India’s sound economic fundamentals.
One of the main reasons for the depreciation of INR has been the broad-based strength of the USD, he said.
“During CY 2024, Dollar Index has increased by about 4.8 per cent till November 19, 2024. More recently, the Dollar Index touched 108.07 on November 22, 2024, its highest in more than a year, exerting pressure on emerging market currencies,” he said.
Further, geopolitical tensions in the Middle East and uncertainty surrounding US elections results also added to the headwinds.
The depreciation of a currency is likely to enhance export competitiveness, which in turn impacts the economy positively. On the other hand, depreciation may raise the prices of imported goods.
He further said, the RBI monitors key developments across the globe which may have an impact on USD-INR exchange rate.
On the domestic equity market front, the 30-share benchmark index Sensex closed 597.67 points, or 0.74 per cent higher, at 80,845.75. The Nifty rose 181.10 points, or 0.75 per cent, to settle at 24,457.15.
Traders said the persistent selling pressure by foreign funds added further strain on the currency. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, as they offloaded shares worth Rs 238.28 crore, according to exchange data.
