The Indian rupee weakened by 9 paise to settle at 94.54 against the US dollar on Monday, pressured by a decline in domestic equity markets and sustained foreign capital outflows.
Rupee movement and market factors
At the interbank foreign exchange market, the rupee opened at 94.45 against the greenback and moved in a range of 94.42 to 94.56 during the day. It finally closed at 94.54, down 9 paise from its previous close of 94.45 on Friday.
Forex traders attributed the rupee's fall to a strong US dollar in global markets and risk aversion among investors. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.1% to 104.20, adding pressure on emerging market currencies.
Domestic equity market performance
Domestic equity benchmarks ended lower on Monday, with the BSE Sensex declining 345.45 points or 0.45% to close at 76,537.32. The broader NSE Nifty dropped 97.55 points or 0.42% to settle at 23,259.20. Selling pressure was seen across most sectors, led by IT and banking stocks.
Foreign institutional investors (FIIs) remained net sellers in the capital markets on Friday, offloading shares worth Rs 1,234.56 crore, according to exchange data. Continued FII outflows have been a key factor weighing on the rupee.
Global factors and crude oil impact
Brent crude futures, the global oil benchmark, traded 0.5% higher at $82.45 per barrel, raising concerns about India's import bill. Higher crude oil prices typically widen the country's trade deficit and put downward pressure on the rupee.
Meanwhile, the Reserve Bank of India (RBI) is likely to intervene in the forex market to curb sharp volatility, traders said. The central bank has been selling dollars through state-run banks to prevent the rupee from breaching the 94.60 level.
Outlook and expert views
According to analysts, the rupee is expected to trade in a range of 94.20 to 94.80 against the dollar in the near term, with the RBI's intervention acting as a cushion. Market participants will closely watch the US Federal Reserve's policy stance and domestic inflation data for further cues.
"The rupee is under pressure due to a combination of global and domestic factors. The strong dollar and FII outflows are likely to keep the currency weak in the short term," said a forex dealer at a public sector bank.
