The Indian rupee declined by 6 paise, reaching a new record low of 84.37 against the US dollar, driven by weak domestic equity markets and continued foreign institutional investor (FII) outflows.
Forex traders noted that investor sentiment was cautious ahead of the US Federal Reserve’s policy decision. Additionally, a rise in global crude oil prices added to the rupee’s pressure.
However, a correction in the US dollar index provided some relief, helping limit further depreciation. The rupee opened at 84.26 at the interbank foreign exchange market, ranging between 84.26 and 84.38 before closing at 84.37, marking a provisional drop of 6 paise from its previous close. On Wednesday, the rupee had already depreciated by 22 paise, closing at a then-record low of 84.31 against the dollar.
“The rupee reached a new record low due to ongoing FII outflows and weakness in domestic equities,” explained forex traders. “An increase in oil prices added to the rupee’s decline, although a slight decrease in the dollar index moderated losses.”
The dollar index, which measures the greenback’s strength against a basket of six major currencies, fell 0.22% to 104.86. Brent crude, the international oil benchmark, dropped 0.32% in futures trading to USD 74.68 per barrel.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, commented: “We expect the rupee to trade with a negative bias amid a strong US dollar, influenced by FII outflows. However, a decline in commodity prices and easing geopolitical risks could provide some support for the rupee at lower levels.”
Choudhary added that any intervention by the Reserve Bank of India (RBI) may also support the currency. Key indicators such as US unemployment claims, decisions from the Federal Open Market Committee (FOMC), and the Bank of England’s policy decision are likely to influence trading. Both the FOMC and Bank of England are anticipated to cut interest rates by 25 basis points. The USD/INR spot price is expected to remain between 84.15 and 84.60.
In domestic equity markets, the BSE Sensex dropped 836.34 points, or 1.04%, to close at 79,541.79, while the NSE Nifty slipped 284.70 points or 1.16%, to settle at 24,199.35. Data from the stock exchanges indicated that foreign institutional investors were net sellers on Wednesday, offloading shares valued at Rs 4,445.59 crore.
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