The Indian rupee plunged by 45 paise to reach a historic low of 87.95 against the US dollar in early trading on Monday, influenced by the strength of the American currency in the global market and a negative trend in domestic equities.
Forex traders noted that the dollar index, currently at 108, increased after President Donald Trump announced plans to impose new 25 per cent tariffs on all steel and aluminium imports. This move has heightened concerns about the ongoing global trade war, especially with China implementing reciprocal duties.
At the interbank foreign exchange, the rupee opened at 87.94 and dropped further to a record low of 87.95 against the dollar, marking a 45 paise decline from the previous close. Despite a 9 paise recovery on Friday to close at 87.50 against the US dollar, the rupee was anticipated to open weaker following the RBI’s 25 bps rate cut on Friday, with another 25 bps cut expected in April to stimulate growth.
The target of 88 could be reached in February, driven by the rapid increase as RBI allowed the rupee to weaken further. The rupee is predicted to trade within the range of 87.70/88.10, with importers likely to buy on dips while exporters adopt a wait-and-see approach.
RBI Governor Sanjay Malhotra emphasized that market forces determine the rupee’s value against the US dollar, with the central bank focusing on the currency’s value in the medium to long term. Meanwhile, the dollar index rose by 0.22 per cent to 108.28, and Brent crude increased by 0.63 per cent to $75.13 per barrel in futures trading.
The Indian rupee is currently trading with a negative bias as foreign banks engage in dollar-buying and importers rush to secure dollars amid global uncertainties. In the domestic equity market, both the BSE Sensex and Nifty were trading lower, with FIIs offloading equities worth ₹470.39 crore on a net basis on Friday.
On the other hand, India’s forex reserves climbed by $1.05 billion to $630.607 billion for the week ending January 31, as per the RBI. This follows a $5.574 billion increase in reserves in the previous reporting week to $629.557 billion.
