The rupee weakened a shade to close at a record low of 85.6450 per US Dollar (USD) on Wednesday, the first day of trading in 2025, with importer demand for the greenback and USD’s strength weighing on it.

The rupee closed three paise weaker on Wednesday vis-a-vis previous close of 85.6150 per dollar. Intraday, rupee touched a low of 85.71and a high of 85.63.

Amit Pabari, MD, CR Forex Advisors, observed that volatility is likely to rise in the forex market as attention shifts to key economic data and the re-inauguration of Donald Trump as US President on January 20.

He said that Trump has proposed steep tariffs, including 60 per cent on Chinese goods, 25 per cent on Canada and Mexico, and the EU if they fail to increase US oil imports.

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“Domestically the rupee is poised to have a promising year, driven by resilient growth, easing inflation and upcoming inflows…In 2024, the rupee held its ground, depreciating by just 2.8 per cent compared to other emerging currencies.

“With a strong Kharif harvest and favorable Rabi sowing, inflation is expected to ease, providing relief to the economy,” Pabari said, adding the rupee is expected to face temporary pressure, likely trading within a range of 85.20 to 85.80.

He said that historically, the rupee tends to appreciate in January after a weaker December. Additionally, during the first year of Trump’s previous tenure, Indian markets saw record FII inflows of $30 billion, helping the rupee to strengthen.

Jahnavi Prabhakar, Economist, Bank of Baroda, said the rupee is expected to depreciate marginally as volatility in FPI (foreign portfolio investor) flow might continue given the likelihood of stronger dollar.