The Indian rupee weakened against the US dollar on Tuesday, closing lower amid a volatile trading session influenced by global cues and domestic market sentiment.
Rupee's Performance and Closing Figures
At the interbank foreign exchange market, the local currency opened weak at 90.05 against the greenback and witnessed an intraday high of 89.96 and a low of 90.17. It finally settled for the day at 90.16 per dollar, registering a decline of 26 paise from its previous close of 89.90. This movement occurred on Tuesday, April 30, 2024.
Key Drivers Behind the Rupee's Depreciation
Forex traders attributed the rupee's fall to several concurrent factors. A primary reason was the strength of the American currency overseas. The US Dollar Index, which gauges the dollar's strength against a basket of six major currencies, was trading higher, making dollar-denominated assets more expensive.
Furthermore, a negative trend in domestic equity markets weighed on investor sentiment. Sustained foreign fund outflows added to the pressure on the local unit. Another significant factor was the rising price of crude oil. Since India is a major importer of oil, higher global crude prices increase the country's import bill, leading to a higher demand for dollars and consequently weakening the rupee.
Brent crude futures, the global oil benchmark, advanced by 0.63% to USD 88.48 per barrel, contributing to the rupee's downward pressure.
Broader Market Context and Expert Outlook
The domestic equity markets mirrored the cautious mood. The BSE Sensex ended the day lower by 188.50 points, settling at 74,482.78. Similarly, the NSE Nifty declined by 38.55 points to close at 22,604.85.
Market analysts suggest that the rupee's movement is being closely watched ahead of the US Federal Reserve's monetary policy decision. The outcome is expected to provide further direction for global currencies, including the Indian rupee. Traders are also monitoring domestic macroeconomic data and global risk appetite for near-term cues.
While the rupee faced headwinds, the country's foreign exchange reserves provide a substantial buffer. According to recent RBI data, India's forex reserves stood at USD 640.33 billion as of April 19, 2024, after a weekly drop of USD 2.28 billion.
