The Indian rupee closed at an all-time low of 87.46 against the US dollar on Wednesday, dropping 39 paise amid concerns over the global trade war. Forex traders attributed the negative bias in the rupee to escalating trade tensions between the US and China, leading to risk aversion among investors. Additionally, worries about a potential rate cut by the Reserve Bank of India and the strength of the US dollar in the international market further weighed on the rupee.
Starting the day weak at 87.13, the rupee hit an intraday low of 87.49 before ending the session at 87.46 (provisional), marking a record closing low. The previous day, the rupee had managed to recover 4 paise from its all-time low.
The global trade tensions intensified as the US imposed tariffs on Chinese imports, prompting retaliation from China. Moreover, the dollar index, which measures the greenback against major currencies, was down by 0.35% at 107.58. In the oil market, Brent crude fell by 0.51% to $75.81 per barrel in futures trade.
Investors are cautious ahead of the RBI’s monetary policy meeting, with expectations of a 25 basis-point rate cut. The MPC meeting began on Wednesday and its decision is anticipated on February 7. This would be the first rate cut in five years, following the previous cut of 40 basis points in May 2020 amid the Covid crisis.
Meanwhile, US President Trump decided to delay tariffs on Mexico and Canada for 30 days, following their commitment to enhance border enforcement measures. On the domestic front, the headline indices BSE Sensex and Nifty closed lower, with FIIs buying equities worth ₹809.23 crore on a net basis the previous day.
In terms of macroeconomic data, India’s services sector saw a slowdown in January, with the HSBC India Services PMI Business Activity Index slipping to 56.5 from 59.3 in December, the lowest level since November.
