The rupee depreciated 14 paise to hit record low of 87.57 against the US dollar in early trade on Thursday weighed down by anticipation of an RBI rate cut and weak economic data. Forex traders said the Indian rupee opened on a weak note and made a fresh record low of 87.57 as market participants anticipated that the Reserve Bank of India (RBI) may slash interest rates on February 7, 2025. Moreover, the rupee continued to face pressure due to sustained foreign fund outflows and a negative trend in domestic equities amid weak risk appetite, they added.
At the interbank foreign exchange, the rupee opened at 87.54 and slipped further to all-time low of 87.57 against the greenback in initial deals, a fall of 14 paise from its previous close. On Wednesday, the rupee plunged 36 paise to close at an all-time low of 87.43 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.11 per cent higher at 107.69. Brent crude, the global oil benchmark, rose 0.13 per cent to USD 74.71 per barrel in futures trade.
Forex traders said the Indian rupee is trading with a negative bias as foreign banks went on a dollar-buying spree and importers scrambled to secure dollars, as they feared further depreciation amidst global uncertainty. Additionally weak PMI data signalled a slowdown in economic activity.
India's services sector activity expanded at the slowest pace in over two years in January amid softer increases in sales and output. The seasonally adjusted HSBC India Services PMI Business Activity Index fell from 59.3 in December to 56.5 in January -- its lowest level since November 2022.
The Indian rupee made a record low as the market anticipated that RBI may slash interest rates on February 7, 2025. Widespread stoploss were triggered further exacerbating the currency weakness, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
"The rupee's slide invoked investor concerns as significant dollar buying by foreign banks and oil companies contributed to the weakness," Bhansali said, adding that the rupee is expected to be in the range of 87.30/60 with a close watch on the RBI. The Monetary Policy Committee (MPC) of the Reserve bank of India (RBI) began its three-day meeting on Wednesday. The MPC will announce its policy decisions on February 7.
In the domestic equity market, the 30-share BSE Sensex was trading 159.80 points, or 0.20 per cent, lower at 78,111.48 points, while the Nifty was down 54.75 points, or 0.23 per cent, at 23,641.55 points. Foreign institutional investors (FIIs) offloaded equities worth Rs 1,682.83 crore in the capital markets on a net basis on Wednesday, according to exchange data.
