Rupee hits new low of 85.97/$; forex reserves drop further to $634 billion

The rupee fell to a new low of 85.97 against the US dollar as the greenback remained well-bid against emerging market currencies ahead of US labour market data, said dealers. It touched 86 per dollar after trading hours in the non-deliverable forward (NDF) market.

 

The local currency edged higher by 3 paise on Friday against the previous low of 85.94 recorded on Thursday.

 

“We see resistance around 85.98 per dollar, but it will not hold for long. We can see 86 per dollar soon,” said a dealer at a state-owned bank.

 

The dollar remains strong, driven by expectations of fewer Federal Reserve rate cuts in 2025, amid projections that United States President-elect Donald Trump’s proposed tariffs and tax cuts could drive inflation higher.

 

 

“The non-farm payroll data is expected to be strong, because of which we could see the dollar index at around 109.80 after market hours. Also, the NDF market saw the 86 mark,” said a dealer at a private bank. “Monday is likely to be the day we finally see 86 if the RBI allows the rupee to move past current levels,” he added.

 

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was trading at 109.18 on Friday, almost flat compared to Thursday.

 

Market participants said state-owned banks sold dollars on behalf of the central bank to prevent further depreciation.

 

Meanwhile, India’s foreign exchange reserves fell by $5.6 billion to $634 billion in the week ended January 3, according to the latest data from the RBI. The decline in total reserves was primarily due to a $6.4 billion fall in foreign currency assets during the week.

 

However, gold reserves rose by $824 million during the same period.

 

The reserves have fallen by $70 billion over the last three months after hitting an all-time high of $705 billion for the week ended September 27, 2024.