Image Credit source: da-kuk/E+/Getty Images
On Tuesday, the rupee fell by 41 paise and closed at 94.56 (provisional) against the US dollar. The continuous outflow of foreign capital amid rising crude oil prices and increasing geopolitical uncertainties is reducing investor confidence. On the other hand, the effect of rise in dollar index is also being seen in the form of fall in rupee. Forex traders said the rupee has already weakened considerably, factoring in a potential widening of the current account deficit (CAD) and volatile capital flows. Apart from this, continuous outflow of foreign funds also put pressure on the rupee, as FIIs have withdrawn more than $ 19 billion from Indian equities so far this year. Let us also tell you what kind of figures are being seen in the currency market.
Big fall in rupee
At the Interbank Foreign Exchange market, the rupee opened at 94.35 against the US dollar, then weakened to the day’s low of 94.58, and finally closed the day at 94.56 (provisional), showing a decline of 41 paise from its previous close. On Monday, the rupee had closed at 94.15 against the US dollar with a rise of just one paise. Rajni Sinha, chief economist at CareEdge Ratings, said the main pressure on the rupee is coming from weak capital inflows. Net FDI flows have been low, while FPI flows have been impacted by global uncertainty, relatively high valuations of equities and the lack of a strong base of AI investments in India.
Increase in dollar index
Meanwhile, the dollar index, which measures the US dollar’s strength against a basket of six currencies, rose 0.24 per cent to 98.73. Global oil benchmark Brent crude was trading at $ 111.07 per barrel with a gain of 2.62 percent in futures trade. Sinha further said that there remains a lot of uncertainty regarding the West Asia conflict. Even if this conflict subsides a bit in the near future, we still expect the average price of crude oil to remain around $85-90 per barrel in FY27. On this basis, the rupee is likely to average in the range of 92-93 in FY27.
stock market decline
In the domestic stock market, Sensex fell 416.72 points to close at 76,886.91, while Nifty fell 97 points to 23,995.70. According to exchange data, foreign institutional investors sold shares worth Rs 1,151.48 crore on Monday. Sinha said that based on the difference in interest rates and REER indicators, the rupee seems somewhat undervalued. However, if the situation worsens—that is, if the conflict escalates and crude oil prices go higher—the rupee will be under pressure to weaken further.
