The Indian rupee experienced a significant decline on Friday, falling by 20 paise to close at 83.49 against the US dollar, marking a sharp contrast to the gains seen earlier in the session. This drop was influenced by volatile domestic equity markets and continuous foreign fund outflows.
Forex traders indicated that the increased month-end demand for the dollar by oil marketing companies played a crucial role in the rupee’s decline, despite some support from lower crude oil prices.
Opening at 83.25 at the interbank foreign exchange market, the rupee fluctuated between an intra-day high of 83.23 and a low of 83.49. By the end of the session, it had settled at 83.49, showing a loss of 20 paise from the previous close of 83.29 on Thursday, when it had gained 11 paise.
Anuj Choudhary, a research analyst at Sharekhan by BNP Paribas, highlighted the factors behind the rupee’s depreciation. “The rupee depreciated on month-end dollar demand from oil marketing companies and importers. We expect the rupee to trade with a slight negative bias due to overall strength in the US dollar amid safe-haven demand driven by geopolitical tensions in the Middle East.”
Choudhary also noted that the volatility in domestic markets, coupled with uncertainty over upcoming election results, might exert further downward pressure on the rupee. However, a positive tone in global markets could offer some support at lower levels.
Looking ahead, traders are expected to focus on forthcoming domestic GDP data, fiscal deficit numbers, and the US personal consumption expenditure price index for further cues. “USD-INR spot price is expected to trade in a range of Rs 83.10 to Rs 83.70,” Choudhary added.
Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was slightly lower by 0.02%, trading at 104.64. The US dollar’s slight decline followed the release of US GDP data, showing a slower-than-expected growth rate of 1.3% in the first quarter of the year, down from the projected 1.6%. This slower growth has sparked expectations of potential interest rate cuts by the Federal Reserve.
In the commodity market, Brent crude futures, the global oil benchmark, fell by 0.44%, trading at USD 81.50 per barrel.
On the domestic front, the equity markets saw modest gains. The BSE Sensex rose by 75.71 points, or 0.10%, closing at 73,961.31 points, while the NSE Nifty increased by 42.05 points, or 0.19%, ending the day at 22,530.70 points. However, Foreign Institutional Investors (FIIs) remained net sellers, offloading shares worth Rs 3,050.15 crore on Thursday, according to exchange data.
As the rupee navigates through these turbulent times, market participants remain watchful of global and domestic economic indicators that could shape the currency’s trajectory in the coming days.
