The Indian rupee ended the trading session on a weaker note this Friday, succumbing to sustained demand for the US dollar from corporate entities and offshore positions. The domestic currency closed at 90.16 per US dollar, marking a decline of 14 paise from its previous close.
Key Factors Behind the Rupee's Decline
Market analysts pointed to a confluence of domestic and global factors that weighed on the rupee's performance. A significant sell-off in the domestic equity markets created a bearish sentiment, which spilled over into the currency market. This was compounded by continued selling activity from foreign portfolio investors.
Furthermore, corporate players were actively seeking dollars, partly for hedging purposes and also due to maturing offshore derivative positions. This elevated demand for the greenback put consistent pressure on the rupee's value throughout the trading day.
Intraday Volatility and Loss Limitation
While the dollar demand was strong, sporadic selling of the US currency near the rupee's lowest levels for the day helped cap deeper losses. This activity prevented a steeper fall and maintained a cautious atmosphere among traders and investors.
On the global front, the US dollar index itself exhibited volatility. This movement was primarily driven by the release of key economic data from the United States, which influenced investor expectations regarding Federal Reserve policy and created ripples across emerging market currencies, including the rupee.
Expert Commentary and Market Outlook
Jateen Trivedi, Vice President and Research Analyst at LKP Securities, provided insight into the day's movement. "The rupee weakened, pressured by weakness in domestic equity markets and continued foreign investor selling," Trivedi stated. He added, "Volatility in the dollar index, driven by key US economic data, has further weighed on the currency."
The day's trading highlights the rupee's ongoing sensitivity to both local equity flows and global dollar dynamics. Market participants are likely to remain vigilant, monitoring further foreign investment trends and upcoming economic indicators for directional cues in the coming sessions.
