The Rupee’s earlier sharpest one-day fall of 68 paise was recorded on February 2, 2023. File
| Photo Credit: Reuters

The Rupee fell steepest in almost two years to hit its lifetime intraday low of 85.80 before a suspected Central bank intervention helped recover some of its losses and settled 23 paise lower at a record low of 85.50 (provisional) against the U.S. dollar on Friday (December 27, 2024) owing to a strong greenback amid increased month-end demand from banks and importers.

According to analysts, the Reserve Bank of India’s stance to hold on to its dollar payments in short-term forward contracts added to the shortage of greenback, with importers rushing to meet their month-end payment obligations.

“Despite robust sentiment in domestic equity markets, the Rupee was weighed down by sustained outflow of foreign funds and rising crude oil prices,” they added. At the interbank foreign exchange, the Rupee opened weak at 85.31 and plunged 53 paise to the lowest-ever intraday level of 85.80.

The unit finally ended the session at 85.50 (provisional) against the greenback, losing 23 paise from its previous closing level of 85.27. The Rupee’s earlier sharpest one-day fall of 68 paise was recorded on February 2, 2023.

The domestic unit has been hitting new lows almost every day in the past couple of weeks. It had plunged 12 paise to 85.27 against the dollar on Thursday (December 26, 2024) after declining 13 paise in the previous two sessions.

“The Central bank holds $21 billion in short-side forward contracts set to mature in December and January. Market speculation suggests that the RBI has refrained from rolling over these maturing forwards, leading to a scarcity of dollars and an oversupply of Rupees.

“Moreover, dollar liquidity in the market remains very low, amplifying the upward momentum in the pair. This imbalance has propelled the USD-INR pair towards 85.8075 levels,” said Amit Pabari, MD of CR Forex Advisors.

According to Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan, the Rupee hit a record low on dollar demand from importers towards the end of the month and outflows from foreign investors (FIIs).

“Rising U.S. treasury yields and crude oil prices also weighed on the Rupee,” he said and projected the USD-INR spot price in a range of ₹85.30 to ₹85.85, saying traders may take cues from goods trade balance data from the U.S.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.04% at 107.94, while the 10-year benchmark U.S. Treasury yield rose 0.76%, hitting its seven-month high level of 4.61%. Brent crude, the global oil benchmark, rose 0.15% to $73.37 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex settled 226.59 points or 0.29% higher at 78,699.07 points, while Nifty went up 63.20 points or 0.27% to close at 23,813.40 points.

Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday (December 26, 2024), as they offloaded shares worth ₹2,376.67 crore, according to exchange data.