For some time now, Trump’s decisions and the appreciation of the dollar have troubled the rupee a lot. Due to which the rupee had crossed the level of 95 against the dollar. But this time the rupee has been hit by none other than the country’s inflation. The country’s wholesale inflation, at a high of almost 38 months, not only reduced the rise of the rupee but also weakened it. Due to which a fall of 9 paise was seen in the rupee. If we look at the data, there has been a decline of about Re 1 in the rupee in the last three trading sessions. Let us also tell you what kind of figures were not seen in the currency market on Wednesday.
Rupee falls for the third consecutive day
On Wednesday, the rupee lost its initial gains and fell 9 paise to close at 93.44 (provisional) against the US dollar. The reason for this was that the rise in crude oil prices after a huge fall and rising domestic inflation figures weakened the market environment. According to Forex analysts, despite vigorous buying in the domestic stock market, the rupee could not strengthen. However, there was an initial uptick when US President Donald Trump said that a second round of talks with Iran could take place “in the next two days”.
In the Interbank Foreign Currency Exchange market, the rupee opened at 93.19 and reached the day’s high of 93.13 against the US dollar. Finally, it closed at the day’s lowest level of 93.44 (provisional) against the US currency, showing a fall of 9 paise from its previous close. On Monday, the rupee had weakened by 52 paise to close at 93.35 against the US dollar. The foreign exchange market remained closed on Tuesday on the occasion of Baba Saheb Ambedkar Jayanti.
Inflation weakened the rupee
Government data released on Wednesday showed that inflation based on the Wholesale Price Index (WPI) rose sharply to the highest level in more than 3 years at 3.88 percent in March. This increase was due to a huge rise in the prices of fuel, electricity and manufactured goods amid the West Asia crisis. According to data released earlier this week, retail inflation based on Consumer Price Index (CPI) increased to 3.4 percent in March, whereas it was 3.21 percent in the previous month. The main reason for this was the rise in prices of some food items.
Jatin Trivedi, VP, Commodity and Currency Research, LKP Securities, said the currency remains highly sensitive to developments around the Strait of Hormuz, which is a key risk factor for global oil supplies. In the near future, the rupee is expected to trade in the range of 93.1093.65, the direction of which will depend on further geopolitical developments and fluctuations in oil prices.
Stock market boomed
Meanwhile, the dollar index – which measures the US dollar’s strength against a basket of six currencies – rose marginally 0.05 per cent to 97.95. Global oil benchmark Brent crude was trading at US $ 96.21 per barrel with a gain of 1.50 percent in futures trade. Talking about the domestic stock market, the 30-share Sensex closed at 78,111.24 with a jump of 1,263.67 points or 1.64 percent, while the Nifty rose by 388.65 points or 1.63 percent to reach 24,231.30. According to exchange data, foreign institutional investors were net sellers on Monday and sold shares worth Rs 1,983.18 crore.
