Rupee Declines 13 Paise to 95.56 Amid Rising Crude Prices and Strengthened Dollar from Fed Hike Expectations
Rupee opened weaker on Monday, trading at 95.56 against the US dollar, down 13 paise from its previous close of 95.43. The decline is attributed to rising crude oil prices and geopolitical tensions, alongside increasing expectations of a rate hike by the US Federal Reserve in September. Forex traders noted that these factors have contributed to a stronger dollar, impacting investor sentiment.
Market Dynamics
The dollar index, which measures the greenback against a basket of six currencies, was at 99.62, slightly down by 0.07 percent. Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP, indicated that the rupee is expected to trade within a limited range of 95.25 to 95.75 throughout the session. He mentioned that exporters are likely to sell near the 95.60 mark, while importers may take advantage of any dips.
Oil prices have also surged, with Brent crude futures rising 1.34 percent to $89.28 a barrel. This increase follows renewed concerns over supply disruptions from the Middle East, particularly after recent US military actions and Iranian responses that have raised fears about oil transport through the Strait of Hormuz. The Reserve Bank of India is reportedly intervening in the foreign exchange market to prevent significant depreciation of the rupee.
Equity Market Impact
Domestic equities faced pressure, with the Sensex dropping 226.60 points to 77,028.56 and the Nifty declining 120.40 points to 24,053.55 in early trading. Foreign institutional investors sold equities worth Rs 5,039.80 crore on a net basis on Friday, according to exchange data. Despite the rupee’s decline, India’s foreign exchange reserves have reached a record high of $729.328 billion, increasing by $12.422 billion in the week ending August 21, as reported by the Reserve Bank of India.
In related news, the commerce ministry is set to meet with industry associations and representatives of export promotion councils on September 1 to discuss the performance of India-US trade. The meeting will be chaired by Darpan Jain, additional secretary of the commerce ministry and chief negotiator for the India-US bilateral trade agreement.
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