Rupee Declines for Sixth Consecutive Day Against the Dollar Amid Forex Challenges
The Indian rupee continued its downward trend on Wednesday, marking the sixth consecutive session of decline. It closed at 86.41 against the US dollar, a decrease of 3 paise, primarily influenced by a stronger dollar and ongoing foreign fund outflows. Forex traders expressed concerns regarding India’s trade relations with the US, warning that any delays in negotiations could lead to increased volatility for the rupee and additional pressure on exporters.
Rupee’s Performance in the Forex Market
The rupee opened at 86.46 in the interbank foreign exchange market and fluctuated between 86.34 and 86.46 throughout the trading day. It ultimately settled at 86.41, down from 86.38 the previous day. This decline continues a trend that began on July 16, when the rupee was valued at 85.92 against the dollar. Anuj Choudhary, a research analyst at Mirae Asset Sharekhan, noted that the rupee’s weakness is attributed to a robust dollar and the outflow of foreign institutional investors. However, he pointed out that a drop in crude oil prices and positive domestic equity performance helped mitigate some of the rupee’s losses.
Impact of US Inflation on the Dollar Index
The dollar index saw a slight increase of 0.04 percent, reaching 97.16, bolstered by higher-than-expected inflation figures from the US. These developments have dampened expectations for a potential interest rate cut by the Federal Reserve. In contrast, Brent crude oil prices fell by 0.52 percent to USD 68.23 per barrel, providing some relief to India, which relies heavily on oil imports. The ongoing fluctuations in the currency market are closely monitored by traders, especially as they await the outcome of trade negotiations between India and the US.
Concerns Among Indian Exporters
As the August 1 deadline for trade talks approaches, Indian exporters are increasingly anxious about the potential outcomes. Officials have warned that a failure or delay in negotiations could result in higher tariffs for Indian goods in the US market, which is one of India’s largest export destinations. A US delegation is scheduled to visit India in August for further discussions, following the conclusion of the fifth round of negotiations in Washington last week. The uncertainty surrounding these talks adds to the pressure on the rupee and the export sector.
Domestic Equity Markets Show Resilience
Despite the rupee’s decline, domestic equity markets experienced significant gains. The Sensex surged by 539.83 points to close at 82,726.64, while the Nifty rose by 159 points, ending at 25,219.90. This rally was driven by strong buying in banking and oil stocks, alongside a positive global trend following a trade agreement between the US and Japan. Notably, major private banks like HDFC Bank and ICICI Bank reached 52-week highs during intraday trading. However, foreign institutional investors continued to sell equities, offloading shares worth Rs 3,548.92 crore on Tuesday. Despite the positive market performance, experts caution that risks from high valuations and currency weakness remain a concern for investors.
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