The Indian rupee depreciated by 39 paise to settle at a historic low of 95.23 against the US dollar on Monday, marking its weakest closing level ever. Forex traders attributed the decline to sustained pressure from elevated crude oil prices and persistent foreign fund outflows amid heightened geopolitical uncertainties.
Key Factors Behind the Rupee's Decline
Brent crude oil continued to hover near the $110 per barrel mark, adding strain to oil-importing economies like India. The high oil prices widen the country's trade deficit and increase demand for dollars, thereby weakening the rupee. Additionally, unabated foreign capital outflows from domestic equity markets further dented investor sentiment. Foreign portfolio investors have been pulling out funds due to rising global risk aversion triggered by geopolitical tensions.
Market Sentiment and Global Cues
The domestic currency opened weaker and remained under pressure throughout the trading session. The dollar index, which measures the greenback against a basket of six major currencies, also strengthened, adding to the rupee's woes. Analysts noted that the combination of high crude prices, foreign outflows, and a strong dollar created a perfect storm for the rupee.
Outlook and Expert Views
Market participants expect the rupee to remain volatile in the near term, with further depreciation possible if oil prices stay elevated and foreign outflows continue. The Reserve Bank of India (RBI) may intervene through dollar sales to curb excessive volatility, but the overall trend remains bearish for the rupee. The all-time low close underscores the challenges facing the Indian economy amid global headwinds.
