The rupee closed at a record low of 85.26 against the US dollar on Thursday, weakening by 6 paise from its previous close of 85.20 on Tuesday. During the session, the currency hit an all-time intraday low of 85.29, reflecting persistent downward pressure amid global economic uncertainties and dollar strength.
The dollar index remained elevated at 108.15, supported by persistent US inflation, geopolitical concerns, and favourable interest rate differentials. US 10-year treasury yields held firm at 4.5940% in early post-Christmas trade, while Brent crude traded at $73.36 per barrel.
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“The rupee remains in a weakening mode due to dollar demand. Exporters may continue to wait with a stop-loss at 85.05, while importers should buy on all dips," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
The Indian currency briefly recovered to 85.21 in the non-deliverable forward market on Wednesday evening, likely due to Reserve Bank of India intervention. However, Bhansali noted that outstanding forex positions have risen to $50 billion, an increase of $35 billion since October, as per the RBI's latest bulletin. He added that the real effective exchange rate rose to 108.14 in November from 107.20 in October, indicating an overvaluation of around 8.5%.
CR Forex Advisors Managing Director Amit Pabari highlighted rising economic headwinds in the US, including increased unemployment and hiring slowdowns, as potential factors that could weaken the dollar in 2025.
“The dollar index is expected to remain elevated in the near term, potentially advancing toward 109.50. However, a breach of the 107.50 support level could lead to a decline toward 104, with a further slide to 100 anticipated next year,” he said.
Pabari also pointed towards domestic factors influencing the rupee's trajectory. “While RBI interventions may offer temporary relief, the rupee's movement will depend heavily on global monetary policies, particularly the Federal Reserve's actions, and India's domestic economic conditions.”
Market participants are closely watching for further cues from US jobless claims data expected later on Thursday. For now, the rupee is expected to trade within a range of 85.10 to 85.40, with importers advised to hedge their positions on dips while exporters are recommended to wait for better levels.
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