The Indian rupee extended its decline on Tuesday, dropping another paisa during early trading hours. The currency settled at 90.91 against the American dollar, maintaining its recent downward trajectory.
Recent Pressure on the Rupee
Monday saw significant pressure on the rupee as it broke through the important 91.01 level. It eventually closed twelve paise lower at 90.90. Market experts point to two main factors driving this weakness. Strong dollar purchases by metal importers created consistent demand for US currency. Simultaneously, foreign investors continued pulling funds out of Indian markets.
Geopolitical Factors Influencing Markets
Traders identified multiple global concerns affecting currency movements. Rising geopolitical uncertainty plays a major role, particularly fresh expansionary signals coming from the United States. This environment increases risk aversion among investors, negatively impacting emerging market currencies like the rupee.
Additional pressure came from President Donald Trump's recent warning about potential tariffs on European countries. The warning specifically addressed European opposition to American plans regarding Greenland. These tensions between the US and Europe contribute to market nervousness.
Historical Context and Current Position
The rupee has hovered near historic lows for several weeks now. Last December, it reached an all-time intra-day low of 91.14. The weakest closing level recorded was 90.93 on December 16th. Just last Friday, the currency experienced a sharp forty-four paise drop to 90.78, following seventeen paise losses over the previous two sessions.
Analyst Perspectives on Market Dynamics
Dilip Parmar, Research Analyst at HDFC Securities, explained the rupee's continued weakness. He cited persistent capital outflows and robust greenback demand from metal importers as primary pressures. "While the currency found technical respite at the 91.00 psychological handle -- bolstered by anticipated intervention from banks -- the underlying bias remains decidedly bearish," Parmar noted.
He added a concerning observation about current market conditions. "With dollar demand outpacing supply, the rupee is currently skirting the edge of a new record low beyond 91.08."
Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, offered additional insights. He believes the rupee will likely remain under pressure due to global risk aversion and escalating US-Europe tensions over Greenland. "FII outflows and uncertainty over trade deal talks may also pressurise the rupee," Choudhary stated.
However, he identified some potential supporting factors. "A weak Dollar and easing tensions between the US and Iran may support the rupee at lower levels." Choudhary forecasts the USD-INR spot price trading within a range of 90.60 to 91.30 in the near term.
Domestic Market Conditions
Weakness in Indian equity markets further damaged investor sentiment. When domestic stocks perform poorly, it often reduces foreign investor interest in Indian assets. This creates additional downward pressure on the rupee as investment flows diminish.
Market participants continue monitoring several key indicators. Foreign institutional investor activity remains crucial, as does dollar demand from importers. Global geopolitical developments, particularly involving the United States, Europe, and trade negotiations, will significantly influence currency movements in coming sessions.
