The Indian rupee depreciated by 32 paise to 95.57 against the US dollar in early trade on Thursday, as persistent foreign fund outflows and a subdued domestic equity market weighed on the local currency.
Forex traders said a marginally stronger greenback overseas further pressured the rupee, which opened weak at 95.50 against the dollar at the interbank foreign exchange market. The local unit later touched a low of 95.57, registering a decline of 32 paise from its previous close of 95.25.
Factors Behind the Decline
Heavy selling by foreign institutional investors (FIIs) in the capital markets continued to exert downward pressure on the rupee. According to exchange data, FIIs offloaded equities worth ₹3,500 crore in the previous session.
Additionally, the domestic equity market opened on a negative note, with the BSE Sensex falling over 300 points in early trade. The benchmark indices extended their losses from the previous day, reflecting weak investor sentiment.
Global Cues
The dollar index, which measures the strength of the US currency against a basket of six major currencies, rose 0.1% to 104.50 in early Asian trade. A stronger dollar makes emerging market currencies like the rupee less attractive.
Meanwhile, the yield on the 10-year US Treasury note remained elevated at around 4.30%, adding to the pressure on emerging market currencies.
Market Outlook
Analysts expect the rupee to remain under pressure in the near term due to sustained FII outflows and uncertainty over global interest rates. The Reserve Bank of India's intervention in the forex market may provide some support, but the overall trend remains weak.
The rupee has been on a declining trajectory in recent sessions, falling from 94.80 levels a week ago to current levels near 95.57. Traders are now eyeing the next support level at 95.80.
