The Indian rupee fell by 30 paise to 95.94 against the US dollar in early trade on Thursday, weighed down by a negative trend in domestic equities and rising crude oil prices. The domestic unit opened at 95.83 at the interbank foreign exchange market and later touched a low of 95.94, registering a decline of 30 paise from its previous close.
Factors Behind the Decline
Forex traders attributed the rupee's weakness to the strengthening of the US dollar in overseas markets and a sell-off in domestic equity indices. The dollar index, which measures the greenback's strength against a basket of six major currencies, rose 0.2% to 106.50, adding pressure on emerging market currencies like the rupee.
Additionally, crude oil prices climbed, with Brent crude futures gaining 0.5% to $73.50 per barrel. India is a major importer of crude oil, and higher prices increase the country's import bill, negatively impacting the rupee.
Domestic Equity Market
Domestic stock markets opened lower, with the BSE Sensex declining over 300 points to 62,000 levels, while the NSE Nifty slipped below 18,450. Foreign institutional investors (FIIs) continued to pull out funds from Indian equities, further pressurizing the rupee. According to exchange data, FIIs sold equities worth Rs 1,200 crore on Wednesday.
Global Cues
The US dollar strengthened amid expectations that the Federal Reserve will maintain higher interest rates for a longer period. Recent economic data from the US showed resilience, reducing hopes of an early rate cut. Meanwhile, geopolitical tensions in the Middle East and concerns over global growth also weighed on investor sentiment.
Outlook
Analysts expect the rupee to remain under pressure in the near term, with the dollar-rupee pair likely to trade in a range of 95.50 to 96.50. The Reserve Bank of India (RBI) is expected to intervene periodically to prevent excessive volatility. Market participants will closely watch the US non-farm payrolls data and the RBI's monetary policy decision next week for further direction.
