The Indian Rupee logo. Representational image.
| Photo Credit: REUTERS

The rupee dropped 1 paisa to 84.92 against the US dollar in early trade on Wednesday (December 18, 2024) and hovered around its all-time low level, as traders await more cues from the US FED on the interest rate front.

Forex traders said dollar demand from importers and foreign banks and a muted trend in domestic equities further dented investor sentiments.

At the interbank foreign exchange, the rupee opened at 84.92 against the greenback, registering a fall of 1 paisa over its previous close.

On Tuesday, the rupee revisited its all-time low closing level of 84.91 against the US dollar.

The rupee remains under pressure from both global and local factors. On the global front, the ripple effects of the Federal Reserve’s anticipated slowdown in rate cuts for 2025 have been felt in India, as evidenced by a correction of over 1 per cent in Indian equities, CR Forex Advisors’ MD-Amit Pabari said.

Equity benchmark indices Sensex and Nifty slumped over 1 per cent on Tuesday, weighed down by an across-the-board selloff amid cautious investors’ approach ahead of the US Fed interest rate decision.

Domestically, the rising trade deficit added strain on the rupee. This increase in trade deficit was driven largely by record-high gold imports in November, Pabari noted.

India’s exports in November contracted 4.85 per cent year-on-year to USD 32.11 billion, while the trade deficit widened to an all-time high of USD 37.84 billion due to a record surge in gold imports.

The country’s gold imports in November reached a record high of USD 14.86 billion, registering a four-fold increase, mainly on account of festival and wedding demands, according to commerce ministry data.

Gold imports stood at USD 3.44 billion in November 2023.

“The USD/INR pair is expected to trade within a range of 84.50 to 85.00 in the near-term,” Pabari added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.03 per cent at 106.92.

Brent crude, the global oil benchmark, rose 0.03 per cent to USD 73.21 per barrel in futures trade.

In the domestic equity market, the 30-share BSE Sensex was trading 84.38 points or 0.10 per cent down at 80,600.07 points in morning trade, while Nifty was down 23.40 points or 0.10 per cent to 24,312.60 points.

Foreign Institutional Investors (FIIs) offloaded Rs 6,409.86 crore in the capital markets on net basis on Tuesday, according to exchange data.