Rupee Declines on Dollar Demand
The Indian rupee depreciated by 15 paise to settle at 94.65 against the US dollar on Tuesday, reversing initial gains as demand for the American currency from importers and oil companies weighed on the local unit.
At the interbank foreign exchange market, the rupee opened at 94.50 and touched an intraday high of 94.48. However, it later slumped to a low of 94.68 before closing at 94.65, down 15 paise from the previous close.
Previous Session Comparison
On Monday, the rupee had pared initial gains and settled lower by 6 paise at 94.51 against the dollar. The continuous decline reflects sustained dollar buying by importers and a cautious sentiment in global markets.
Market Factors
Forex traders attributed the rupee's weakness to strong dollar demand from importers, particularly oil refiners, and a lackluster performance in domestic equity indices. The benchmark BSE Sensex declined 0.2% during the session, while the Nifty 50 slipped 0.15%.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.1% higher at 104.50, adding pressure on emerging market currencies.
Global Cues
Brent crude oil prices remained elevated near $85 per barrel, raising concerns about India's import bill and widening trade deficit. Higher oil prices typically lead to increased dollar demand from oil-importing countries like India.
Foreign institutional investors (FIIs) were net sellers in the capital market on Tuesday, offloading shares worth ₹1,200 crore, as per exchange data. This further dampened sentiment for the rupee.
Outlook
Analysts expect the rupee to trade in a range of 94.50 to 95.00 in the near term, with the direction depending on global risk appetite and central bank intervention. The Reserve Bank of India is likely to step in to curb excessive volatility, as it has done in recent sessions.
