The Indian rupee commenced trading on a somber note Thursday, depreciating over 20 paise against the US dollar in early trade. This decline was attributed to the strengthening of the American currency globally following the US Federal Reserve's hawkish policy stance.
Rupee Performance in Interbank Market
The rupee opened at 94.66 against the dollar in the interbank foreign exchange market and subsequently slipped to 94.71, marking a decline of 21 paise from its previous close of 94.50. On Wednesday, the currency had appreciated by 10 paise to settle at 94.50 against the greenback.
Reason Behind Rupee Weakness
According to forex traders, the US dollar gained momentum after the Federal Reserve maintained interest rates unchanged, as anticipated, but indicated that at least one quarter-point rate increase could occur later this year. The dollar index surged to 100.23, its highest level in four months.
"Asian currencies weakened considerably, dragging the rupee lower this morning. Most asset classes fell against the dollar, keeping it well bid while the asset class was well offered," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Dollar Index and Crude Oil Prices
The dollar index, which measures the US currency against a basket of six major currencies, was trading 0.14% higher at 100.23. Meanwhile, Brent crude futures declined by 1.68% to $78.21 per barrel.
Domestic Equity Markets
Domestic equity markets also opened lower, with the Sensex falling 111.23 points to 77,044.39 and the Nifty slipping 26.85 points to 24,058.85 in early trade. Despite this, foreign institutional investors remained net buyers, purchasing equities worth Rs 101.59 crore on Wednesday, according to exchange data.
Geopolitical Factors Supporting Sentiment
Traders noted that sentiment was supported by reports that the United States and Iran had electronically signed a memorandum of understanding aimed at ending hostilities and establishing a framework for negotiations on Iran's nuclear programme. Negotiators are expected to meet in Geneva on Friday.
"The agreement has improved market sentiment considerably, although President Trump simultaneously warned that military action could resume if Iran fails to comply with the framework," said Amit Pabari, MD of CR Forex Advisors.
India-US Trade Agreement Talks
Separately, Prime Minister Narendra Modi and US President Donald Trump directed officials from both countries to work towards concluding a balanced, mutually beneficial and commercially meaningful trade agreement at the earliest. US Trade Representative Jamieson Greer is scheduled to visit India next week to advance discussions on the proposed trade agreement.
Get the latest business news and top stories. Download the TOI App.
Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.
About the Author: TOI Business Desk – The TOI Business Desk is a vigilant and dedicated team of journalists committed to delivering the latest and most relevant business news from around the world to readers of The Times of India. The primary focus of the TOI Business Desk is to keep a watchful eye on the global business landscape, covering a wide spectrum of industries, markets, economic trends, in-depth analysis, exclusive reports and breaking stories that impact businesses and economies. With a mission to provide valuable insights and updates, the desk ensures that TOI readers are well-informed about the ever-changing and dynamic world of commerce and can navigate the complexities of the business world.
