Tue Dec 31 13:43:51 UTC 2024: ## Rupee Plunges to Record Low Against Dollar, Ending Year Down 3%

**Mumbai, January 1, 2025** – The Indian rupee closed at a fresh record low of 85.65 against the US dollar on Tuesday, marking a 3% decline for the year. The currency depreciated by 13 paise against its previous close, driven by a confluence of factors including significant foreign fund outflows, a strengthening dollar globally, and weakening domestic macroeconomic indicators.

Forex traders cited the Federal Reserve’s cautious approach to rate cuts and the overall strength of the US dollar as key contributors to the rupee’s continued pressure. Slowing domestic growth, a widening trade deficit, and persistent foreign fund outflows further fueled the decline. The rupee breached the 84 and 85 levels earlier in December, even touching an intraday low of 85.80 on December 27th.

Foreign institutional investors (FIIs) sold off ₹1,893.16 crore in Indian capital markets on Monday alone, adding to the pressure on the currency. For the entire year, net FII inflows were a mere ₹5,000 crore, a stark contrast to the ₹1.71 lakh crore invested in 2023. Analysts attribute this shift to elevated domestic valuations and geopolitical uncertainties.

While the Reserve Bank of India (RBI) could intervene to support the rupee, analysts at Mirae Asset Sharekhan predict a continued negative bias due to high crude oil prices, persistent dollar demand, and ongoing selling pressure from foreign funds. They forecast the USD/INR spot price to trade between 85.40 and 85.85.

India’s external debt increased to USD 711.8 billion as of September 2024, a 4.3% rise from June. Despite a slight moderation in the current account deficit (CAD) to 1.2% of GDP in the July-September quarter, the overall economic picture remains challenging for the rupee. The benchmark Sensex index closed slightly down on Tuesday, reflecting the overall market sentiment. Brent crude prices also rose, adding further pressure to the currency.

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