Rupee Closes Lower at 91.79 Against US Dollar, Fails to Sustain Early Gains
The Indian rupee gave up its initial advances and ended the trading session in negative territory, declining by 11 paise to settle at 91.79 (provisional) against the US dollar. This downward movement occurred despite supportive factors like a retreating dollar index, as sustained foreign fund outflows negated the positive momentum.
Early Optimism Fades Amid Selling Pressure
Forex traders noted that the rupee opened higher, buoyed by a softening US dollar index and the reassurance provided by a long-awaited trade breakthrough with Europe. However, this optimism was short-lived. Selling pressure from foreign institutional investors, coupled with ongoing geopolitical tensions, dampened investor sentiment, leading to a reversal in the currency's trajectory.
Intraday Volatility and Trading Range
At the interbank foreign exchange market, the rupee commenced trading at 91.60 and initially strengthened to touch an early high of 91.50. However, it quickly pared these gains, sliding to an intraday low of 91.83 against the greenback. Ultimately, the domestic unit closed at 91.79, marking an 11 paise drop from its previous close. This performance followed a rebound on Tuesday, when the rupee had gained 22 paise to close at 91.68, recovering from all-time low levels.
Impact of India-EU Free Trade Agreement
The trade deal between India and the European Union, announced on Tuesday, played a significant role in early market sentiment. This free trade agreement (FTA), concluded after prolonged negotiations, is expected to grant duty-free access to the 27-nation bloc for Indian sectors such as apparel, chemicals, and footwear. In return, the EU will benefit from concessional duties on cars and wines in the Indian market. Dubbed the "mother of all deals," it aims to create a combined market of approximately 2 billion people, offering long-term economic benefits.
Broader Market Indicators and Trends
In global markets, the dollar index, which measures the US dollar's strength against a basket of six major currencies, was trading 0.07 percent lower at 96.14. Meanwhile, Brent crude futures, a key global oil benchmark, declined by 0.43 percent to USD 67.28 per barrel. On the domestic front, equity markets showed robust performance, with the Sensex surging 487.20 points to close at 82,344.68 and the Nifty gaining 167.35 points to settle at 25,342.75. Despite this bullish trend in stocks, foreign institutional investors were net sellers, offloading equities worth ₹3,068.49 crore on Tuesday, as per exchange data, contributing to the rupee's weakness.
In summary, the rupee's decline highlights the complex interplay of global and domestic factors, where positive developments like trade agreements and a weaker dollar were overshadowed by foreign fund outflows and investor caution. Market participants will closely monitor upcoming economic data and geopolitical developments for further cues on the currency's direction.
