The Indian rupee depreciated by 18 paise to 96.38 against the US dollar in early trade on Monday, as the American currency strengthened in overseas markets and risk appetite weakened.
Factors Behind the Rupee's Decline
Forex traders attributed the fall to a strong dollar index, which edged higher amid expectations of further interest rate hikes by the US Federal Reserve. Additionally, sustained foreign fund outflows and a negative trend in domestic equities weighed on the local unit.
At the interbank foreign exchange, the rupee opened at 96.30 and then slipped to 96.38, registering a decline of 18 paise over its previous close of 96.20. The local unit had settled at 96.20 against the greenback on Friday.
Global Cues and Market Sentiment
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.12% higher at 106.18. Global oil benchmark Brent crude futures fell 1.08% to $93.95 per barrel, providing some relief but not enough to offset the dollar's strength.
Foreign institutional investors (FIIs) remained net sellers in the capital market on Friday, offloading shares worth Rs 1,234 crore, according to exchange data. This persistent selling pressure has been a drag on the rupee.
Domestic Equity Market
On the domestic equity front, the 30-share BSE Sensex was trading 258.51 points or 0.41% lower at 62,297.28, while the broader NSE Nifty declined 79.60 points or 0.43% to 18,552.50. The weak equity market also dampened sentiment for the rupee.
The rupee's movement will be closely watched amid global cues and domestic macroeconomic data. Traders are also awaiting the US consumer price index (CPI) data due later this week, which could influence the Federal Reserve's policy stance.
