Rupee slips to 85.69 against US dollar in early trade

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The Indian rupee fell by 5 paise to 85.69 against the US dollar in early trade on Wednesday, marking the first trading session of the year. The decline came as the American currency strengthened in global markets, coupled with persistent outflows of foreign funds, which pressured the rupee lower.

Forex traders noted that the rise in the US dollar index (DXY) and the upward movement in US 10-year bond yields were contributing factors. These trends are largely attributed to the Federal Reserve's cautious stance, along with external factors such as the "Trump factor," influencing global market sentiments. The impact of these factors was felt as global trading volumes remained subdued due to the ongoing holiday season in major economies, including the UK and parts of Europe.

At the interbank foreign exchange market, the rupee opened at 85.63 before slipping further to 85.69 against the greenback, reflecting a 5-paise dip compared to its previous close. On Tuesday, the rupee had depreciated by 12 paise, settling at a record all-time closing low of 85.64 against the US dollar. On December 27, the currency had hit its lifetime intraday low of 85.80.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, mentioned that the Reserve Bank of India (RBI) had supported the rupee at the 85.6450 level on Tuesday. He also highlighted that with US markets closed on Wednesday, there would be limited cash dollar demand, making a lower opening for the USD/INR an opportunity for importers to buy dollars for their payables. Bhansali suggested that the day's trading range for the rupee could be between 85.40 and 85.70.

Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, was recorded at 104.48. In global commodity markets, Brent crude futures were priced at USD 74.64 per barrel.

On the domestic equity front, the 30-share BSE Sensex was trading lower by 127.91 points, or 0.16 per cent, at 78,011.10 points, while the Nifty dropped by 36.30 points, or 0.15 per cent, to 23,608.50 points. Foreign Institutional Investors (FIIs) were also active in the capital markets, offloading Rs 4,645.22 crore on a net basis on Tuesday, as per exchange data.

On the economic front, the Centre's fiscal deficit for the first eight months of the fiscal year 2024-25 reached 52.5 per cent of the full-year target, with the fiscal deficit standing at approximately Rs 8.47 lakh crore during the April-November period, according to data from the Controller General of Accounts (CGA).