The Indian rupee weakened by 7 paise to 94.58 against the US dollar in early trading on Tuesday, as month-end demand for dollars from importers and corporates exerted pressure on the domestic currency, according to forex traders.
Rupee Opens Lower Amid Dollar Demand
At the interbank foreign exchange market, the rupee opened at 94.58 against the greenback, registering a loss of 7 paise from its previous close of 94.51. On Monday, the rupee had settled lower by 6 paise after paring initial gains.
Forex traders noted that the losses were partly cushioned by relatively stable crude oil prices globally. However, concerns about potential supply disruptions in the Gulf region and continued uncertainty surrounding the Strait of Hormuz weighed on investor sentiment.
Month-End and Quarter-End Pressures
“As June draws to a close, month-end and quarter-end dollar demand has started showing up once again. Importers, corporates, and banks typically use this period to square positions and meet payment obligations, creating additional demand for dollars,” said Amit Pabari, Managing Director of CR Forex Advisors.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, was trading at 101.31, up 0.21 per cent. Meanwhile, Brent crude, the global oil benchmark, edged lower by 0.44 per cent to USD 72.83 per barrel in futures trade.
Geopolitical Risks and Oil Market
“The sharp geopolitical risk premium that had pushed oil higher earlier has largely faded, with traders now focusing on the resumption of US-Iran discussions. However, mixed signals from both sides mean that energy markets are not yet ready to declare the situation resolved,” Pabari added.
The stability in crude oil prices provided some relief to the rupee, as India is a major importer of crude oil and higher prices typically weigh on the currency.
Domestic Macroeconomic Data
On the domestic macroeconomic front, industrial production expanded by 5.1 per cent in May, exceeding market expectations and improving from the previous month’s reading. The Index of Industrial Production (IIP) data suggests that despite global uncertainty, domestic economic activity continues to show resilience.
“Stronger growth ultimately strengthens the foundation on which the rupee stands,” Pabari noted, adding that the IIP data is a positive indicator for the economy.
Technical Outlook and Equity Market
“Technically, 94.00-94.30 remains a strong support zone for USDINR. The pair has repeatedly tested this area over the past week but has been unable to break lower, indicating strong dollar demand and possible RBI buying interest,” Pabari explained.
On the domestic equity market front, the Sensex declined 103.95 points to 76,624.42 in early trade, while the Nifty dropped 40.10 points to 23,908.80. Foreign institutional investors sold equities worth Rs 1,350.1 crore on a net basis on Monday, according to exchange data.
