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The Indian rupee weakened sharply on Friday, hitting a fresh record closing low of 85.54 against the US dollar. This marked its steepest single-day decline since February 2023.

The domestic currency, during the trading session, had depreciated 53 paise to hit its lowest ever value of 85.81. It had opened at 85.32 per dollar and had closed at 85.26 on Thursday.

Month-end dollar demand from importers and oil marketing companies, coupled with global dollar strength, exerted significant pressure on the rupee. The currency has depreciated by 2.9% so far in 2024, but remains one of the least volatile among Asian peers. In comparison, the Japanese yen and South Korean won have seen declines of 10% and 12%, respectively, this year. Currency traders noted heightened dollar demand from importers who had not previously covered their exposures. Market participants also pointed to uncertainty stemming from the US Federal Reserve's stance on monetary policy and potential geopolitical shifts in the event of a Trump administration returning to power. Market participants are closely watching RBI Governor Sanjay Malhotra's approach to managing foreign exchange volatility amid evolving global economic conditions.

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