The Indian rupee hit a new all-time low on Tuesday, closing at 88.18 against the US dollar. The decline of 8 paise was primarily driven by ongoing uncertainty surrounding a bilateral trade agreement with the US, persistent outflows of foreign funds, and a bearish trend in the domestic equity market.

Forex traders noted that the local currency is trading near its lowest levels ever, with risks skewed to the downside due to concerns over potential US trade tariffs.

Key Factors Behind the Decline

The rupee opened weak at 88.14 in the interbank foreign exchange market and continued to lose ground, touching an intraday low of 8.20 before settling at 88.18. This provisional closing value represents a fresh record low, surpassing the previous record of 88.10 set on Monday.

According to Anuj Choudhary, a Research Analyst at Mirae Asset ShareKhan, the rupee is expected to continue its negative trend. "Uncertainty over trade tariffs and weak domestic markets may pressurize the local unit," Choudhary said. "FII outflows and a positive tone in crude oil prices may further weigh on the domestic currency."

Market sentiment was also affected by a broader rise in the US dollar, with the dollar index, which measures the greenback's strength against six major currencies, climbing 0.63 per cent to 98.38. On the domestic front, the Sensex fell by 206.61 points, while the Nifty dropped by 45.45 points.

Trade Talks Tensions

The market's caution is linked to the stalled trade talks between India and the US. While Commerce and Industry Minister Piyush Goyal confirmed that negotiations for a bilateral trade agreement are ongoing, the US team has deferred its scheduled visit to India for the sixth round of talks, with no new dates finalized.

The trade discussions have been complicated since the US imposed a 50 per cent duty from August 27. Despite the tensions, US Treasury Secretary Scott Bessent expressed confidence, stating that the two nations will ultimately resolve the issues.