The rupee depreciated 3 paise to 85.78 against the US dollar in early trade on Friday, weighed down by the strength of the American currency in the overseas market and a muted trend in domestic equities.
Forex traders said the US dollar gained against most currencies during 2024 and continued to remain on a strong footing this year.
Moreover, the market will keep its focus on Donald Trump's policies which could boost growth but could also increase price pressures and this would keep the US FED on a hold for longer on interest rate cuts.
At the interbank foreign exchange, the rupee opened at 85.77 then fell further to 85.78 against the American currency, registering a decline of 3 paise over its previous close.
On Thursday, the rupee depreciated 11 paise to close at a record low of 85.75 against the US dollar.
On December 27, the local currency touched its lifetime intraday low of 85.80 against the greenback.
"The Indian rupee opened weaker after a record closing on Thursday, as dollar demand continued unabated while the RBI sold USD 1 billion to prevent further weakening. As rupee remains overvalued vs its peers, it continues to weaken to new record lows daily," Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 109.19, down 0.19 per cent.
"The US dollar headed for the best week since November when Trump won the elections, on US rates and economic outlook. It was underpinned by expectations of fewer rate cuts and a view that the US economy will continue to outperform its peers globally," Bhansali added.
Brent crude, the global oil benchmark, was quoted 0.30 per cent higher at USD 76.16 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex was trading 441.00 points or 0.55 per cent down at 79,502.71 in morning trade, while Nifty was lower by 113.45 points or 0.47 per cent to 24,075.20.
Foreign Institutional Investors (FIIs) purchased Rs 1,506.75 crore in the capital markets on net basis on Thursday, according to exchange data.
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