The Indian rupee weakened for the second consecutive session on Wednesday, falling 40 paise to close at 95.76 against the US dollar, according to a report by PTI. The decline was driven by concerns over proposed US tariffs, rising crude oil prices, persistent foreign fund outflows, and escalating geopolitical tensions.
Market Pressures Mount
Forex traders noted that investor sentiment came under pressure after the Office of the United States Trade Representative (USTR) proposed additional duties on imports from several countries, including India. Meanwhile, fresh tensions in the Middle East pushed oil prices higher, adding to the rupee's woes.
At the interbank foreign exchange market, the rupee opened at 95.43 against the US dollar. It touched an intraday low of 95.80 before settling at 95.76, down 40 paise from Tuesday's close of 95.36.
USTR Tariff Proposals
The USTR has proposed an additional 12.5% duty on imports from 54 countries, including India, citing failure to prohibit imports of goods produced with forced labour. Forex traders said the move, coupled with uncertainty around US-Iran relations, weighed on risk sentiment.
Dilip Parmar, Research Analyst at HDFC Securities, said: "The rupee fell for a second consecutive session, weighed down by capital outflows and mounting concerns over US President Donald Trump's latest tariff proposals. Escalating tensions in the Middle East also pushed crude oil prices higher, further denting investor sentiment. Additionally, a stronger US dollar and rising bond yields continued to pressure regional currencies on expectations of hawkish central banks."
India's Engagement with the US
The government said India is engaged with the US on the Section 301 investigations concerning forced labour and excess industrial capacity. India is also "parallelly" engaged with the US on finalising an interim trade agreement, the framework for which was announced through a joint statement on February 7. The USTR had launched two separate Section 301 investigations on March 11 and 12, covering 60 economies over concerns related to forced labour and excess industrial capacity.
Focus Shifts to RBI Policy Decision
Market participants are now closely watching the Reserve Bank of India's Monetary Policy Committee (MPC) meeting for cues on interest rates, inflation and the rupee's outlook. The MPC meeting is scheduled from June 3 to June 5, with RBI Governor Sanjay Malhotra set to announce the policy decision on June 5.
Meanwhile, the dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.13% higher at 99.34. Brent crude, the global oil benchmark, climbed 2.76% to USD 98.65 per barrel in futures trade.
Domestic Equity and FII Outflows
On the domestic equity front, the Sensex fell 303.67 points to close at 74,346.17, while the Nifty declined 77.95 points to settle at 23,405.60. Foreign institutional investors (FIIs) remained net sellers, offloading equities worth Rs 5,616.56 crore on Wednesday, according to exchange data.
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