Rupee Declines 22 Paise to Close at 85.54 Against Dollar Amid Market Events

The Indian rupee experienced a decline of 22 paise, closing at 85.54 against the US dollar on Thursday. This drop was driven by strong demand for the dollar from importers and ongoing foreign fund outflows. Despite this pressure, a rise in domestic equities and a decrease in crude oil prices helped to mitigate the rupee’s losses, according to forex traders.

Market Performance and Currency Fluctuations

In the interbank foreign exchange market, the rupee opened at 85.53 and fluctuated between 85.48 and 85.73 throughout the trading session. Ultimately, it settled at 85.54 per dollar, marking a depreciation of 22 paise from the previous day’s close. On Wednesday, the rupee had gained 4 paise, closing at 85.32 after initially showing strength earlier in the day. Over the past two sessions, the domestic currency had started strong, reaching levels near 84.62 on Tuesday and 85.05 on Wednesday, but lost momentum as the day progressed. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, suggested that the demand for USD might be linked to geopolitical tensions between India and Pakistan, which could have otherwise allowed the rupee to appreciate further.

Impact of Crude Oil Prices

Brent crude futures, a global benchmark for oil prices, fell by 3.72% to USD 63.63 per barrel. This decline in oil prices provided some relief to the Indian rupee by reducing import costs. Lower crude prices are generally favorable for the rupee, as India is a major oil importer. The dollar index, which gauges the strength of the greenback against six major currencies, also saw a decrease of 0.28%, settling at 100.75. These factors combined to create a complex environment for the rupee, balancing the pressures from dollar demand and foreign outflows with the benefits of lower oil prices.

Future Outlook for the Rupee

Looking ahead, Anuj Choudhary, a Research Analyst at Mirae Asset Sharekhan, indicated that the rupee might trade with a positive bias, supported by gains in domestic markets and improved global risk sentiment. He noted that easing geopolitical tensions between India and Pakistan, along with reduced trade tariff tensions between the US and China, could bolster the rupee’s performance. Traders are expected to keep a close eye on upcoming US economic indicators, including the Producer Price Index (PPI), retail sales, and industrial production, which could influence the USD/INR spot rate. Choudhary anticipates that the exchange rate will fluctuate between 85.20 and 85.90 in the near term.

Equity Market Performance

On the equities front, Indian stock markets displayed volatility but ultimately closed with significant gains. The 30-share BSE Sensex rebounded from an initial decline, surging by 1,200.18 points, or 1.48%, to finish at 82,530.74. Similarly, the NSE Nifty rose by 395.20 points, or 1.60%, closing at 25,062.10. Foreign institutional investors (FIIs) were net buyers, investing Rs 5,392.94 crore in Indian equities on Thursday, according to exchange data. Market participants are now eagerly awaiting comments from US Federal Reserve Chair Jerome Powell, whose upcoming speech could provide insights into future monetary policy directions.

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