Rupee Hits Historic Low of 83.80 Against US Dollar Amid Global Market Turbulence

August 5, 2024

New Delhi, India

The Indian Rupee faced a severe drop, hitting an all-time low of 83.80 against the US dollar on August 5. This decline is attributed to a significant downturn in Indian equity markets and substantial foreign fund outflows, compounded by global market uncertainties.

Key Factors Influencing the Rupee’s Decline:

1. Opening Trade and Immediate Impact:
   • The rupee opened at 83.78 at the interbank foreign exchange market and quickly fell to 83.80, marking an 8-paise drop from its previous close.
2. Global Market Conditions:
   • The rupee’s decline is part of a broader trend where major global equities experienced a significant sell-off over the past week.
   • Last week’s US Jobs Report, which showed lower-than-expected job numbers, triggered recession fears, leading investors to seek safe-haven assets.
3. Domestic Market Response:
   • Indian stock markets mirrored global trends, with both the BSE Sensex and Nifty 50 indices falling by approximately 3%.
   • Despite the weakening US dollar, the rupee remained largely below the 83.70 level.
4. Geopolitical and Economic Uncertainty:
   • Upcoming US elections and escalating tensions in the Middle East, particularly after the assassination of Hamas leader Ismail Haniyeh in Tehran, have added to the market’s risk-off sentiment.

RBI’s Intervention and Market Reaction:

• Reserve Bank of India’s Actions:
  • The RBI intervened to support the rupee, with state-run banks selling dollars intermittently, likely on behalf of the central bank, to stabilize the local currency.
• Market Movements:
  • By 12:41 PM, the rupee hit a new low of 83.85 against the dollar.
  • The US dollar index dropped by 0.3% to 102.85, while most Asian currencies gained between 0.3% and 2.2%.
  • US bond yields also saw a sharp decline, with the 10-year Treasury yield falling by 8 basis points to 3.71%, its lowest level since July 2023.

Conclusion: The Indian Rupee’s record low against the US dollar highlights the vulnerability of emerging markets to global economic shifts and geopolitical tensions. As investors move towards safer assets amidst growing fears of a US economic slowdown and global market instability, the rupee’s path forward remains uncertain. The Reserve Bank of India’s interventions will be crucial in navigating this turbulent period.