Rupee Falls Below 84 Against US Dollar Amid FPI Selloff and Rising Oil Prices
The Indian rupee hit a record low, falling below 84 per dollar due to foreign portfolio investor selloff and rising crude oil prices. RBI intervenes to curb further depreciation as forex reserves stand at $701 billion.
Rupee Falls Below 84 Against US Dollar Amid FPI Selloff and Rising Oil Prices
The Indian rupee weakened to a historic low, dropping below 84 per dollar for the first time on Friday, driven by continued selling of domestic equities by foreign portfolio investors (FPIs) and rising concerns over escalating crude oil prices. The local currency depreciated to 84.10 during the day before closing at 84.07, marking its lowest point since breaching the 83 per dollar level in October 2022. The rupee’s previous record low was 83.99, seen on September 12, 2024.
Having lost 0.8% of its value against the dollar in the current financial year, the rupee ranks as the third-worst-performing currency in Asia, following the Bangladeshi taka and the Philippine peso. FPIs have withdrawn nearly $6 billion from domestic equities so far in October, alongside pulling out $125 million from the debt market.
Currency traders noted that government banks sold dollars on behalf of the Reserve Bank of India (RBI) to prevent further depreciation. VRC Reddy, treasury head at Karur Vysya Bank, emphasized the psychological importance of the 84 per dollar level, predicting the rupee’s range to be between 83.90 and 84.10 for the remainder of the month. The RBI has been defending this level for over two months.
Amit Pabari, managing director at CR Forex, anticipates a potential recovery for the rupee if FII outflows ease, supported by India’s robust foreign exchange reserves, which stood at $701 billion as of October 4. The country has accumulated nearly $78 billion in reserves in 2024, second only to China.
The rupee had briefly strengthened to 83.48 per dollar after the U.S. Federal Reserve implemented a 50 basis points rate cut two weeks ago. However, geopolitical tensions in West Asia caused a spike in crude oil prices, leading to renewed pressure on the currency. India relies on imports for over 80% of its oil needs, making rising oil prices a critical factor in the rupee’s depreciation.
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