November 8, 2024: The Indian rupee fell to a historic low of 84.37 against the US dollar in early trading on Friday, marking a fresh all-time low. The currency's decline, down by 5 paise from the previous close, reflects persistent pressures from foreign fund outflows, a sluggish domestic equity market, and the evolving global financial environment.

At the interbank foreign exchange, the rupee opened at 84.32 against the dollar but quickly slipped further to the new record low of 84.37, continuing the downward trend that had begun the previous day. On Thursday, the rupee had closed at 84.32, down 1 paisa from its prior session.

Forex traders attribute the rupee's continued depreciation to a combination of global and domestic factors. The US Federal Reserve's recent decision to cut interest rates by 0.25 percentage points to a target range of 4.5% to 4.75% has significantly impacted currency markets. The Fed's shift towards a more neutral-to-dovish stance on interest rates is signaling a changing global financial landscape, which could lead to increased volatility in emerging market currencies, including the rupee.

Amit Pabari, Managing Director of CR Forex Advisors, noted, “The spotlight will now be on the Reserve Bank of India (RBI) and how effectively it navigates this shifting currency landscape. In such a dynamic environment, only those who adapt swiftly will thrive in the market ahead.”

Market observers are also monitoring the broader implications of US economic policy under the leadership of former President Donald Trump, whose tax and trade policies are likely to continue influencing global markets. Traders are concerned that the return of such policies could further add to market instability and heighten volatility in the coming months.

The dollar index, which measures the strength of the US dollar against a basket of six major currencies, was slightly higher, up 0.02% at 104.53. Meanwhile, Brent crude oil prices saw a minor dip, falling 0.65% to USD 75.14 per barrel in futures trade.

As the rupee continues its downward trajectory, attention is now turning to how the RBI will respond. With the global financial environment in flux, experts are watching closely to see if the central bank will take steps to stabilize the currency or if further volatility is in store.

The continued depreciation of the rupee is raising concerns about the impact on India’s inflation and trade balance, with higher import costs and a potential increase in the cost of foreign debt.