Rupee sees steepest 1-day fall since February 2023

Beyond the strengthening of the dollar post Donald Trump’s win in the US elections, elevated global crude oil prices and a widening current account deficit (CAD) are putting pressure on the rupee, analysts said.

Bengaluru: The rupee took a steep fall on Friday, closing at 85.54 against the dollar and marking its sharpest one-day fall since February 2023.

During the trading session, the rupee plunged 53 paise to hit its lowest ever value of 85.81. The previous close on Thursday was 85.27

Beyond the strengthening of the dollar post Donald Trump’s win in the US elections, elevated global crude oil prices and a widening current account deficit (CAD) are putting pressure on the rupee, analysts told DH.

“Global uncertainties, a slowing export demand due to a slowdown in global demand will weigh heavily on the rupee. The pressure on the rupee is likely to persist through most of FY25, stabilising only in the latter half of 2025, due to factors including the US monetary policy, geopolitical tensions, India’s current account deficit driven by weak merchandise exports and rising imports,” said Arsh Mogre, economist, Institutional Equities, PL Capital.

In addition to global volatility, there were domestic factors.

“The rupee is likely to remain under pressure as domestic economic challenges persist, including weak manufacturing exports, rising Foreign Institutional Investor (FII) outflows, and a growing trade deficit,” said Naveen Mathur, director, Commodities and Currencies, Anand Rathi Shares and Stock Brokers.

In terms of trade impact, the cost of imports would increase for commodities such as crude oil that India is heavily dependent on imports for, as well as fertilisers, electronics and may even extend to gold. Inflows of foreign direct investments (FDI) are also expected to remain slow.

On how this will affect companies, Anas Rahman Junaid, founder and chief researcher, Hurun India, said, “While a weaker rupee can benefit export-driven businesses, it also increases the cost of raising foreign capital. The currency depreciation could affect valuations, especially for those with significant overseas revenues or investments.”

The USD/INR pair crossed the 85-mark for the first time on December 19, 2024, after the Federal Reserve said it would go for two rate cuts in 2025, as opposed to an expected four. Analysts expect the rupee to stay well above 85 till the next Budget.