The Indian rupee weakened by 31 paise to settle at 95.67 against the US dollar on Wednesday, marking a fresh low amid persistent dollar demand and a sell-off in domestic equities. The local currency had closed at 95.36 on Tuesday, down 17 paise from the previous session.
Factors Behind the Decline
Forex traders attributed the rupee's fall to a combination of global and domestic factors. A strengthening US dollar index, driven by expectations of further rate hikes by the Federal Reserve, weighed on emerging market currencies. Additionally, sustained foreign capital outflows from Indian equity markets added pressure on the rupee.
On the domestic front, the benchmark Sensex and Nifty indices ended lower, reflecting weak investor sentiment. The dollar demand from importers, particularly oil refiners, also contributed to the rupee's slide.
Market Overview
The rupee opened weak at 95.50 and touched an intraday low of 95.70 before closing at 95.67. The dollar index, which measures the greenback against a basket of six major currencies, rose 0.2% to 104.50, adding to the rupee's woes.
Meanwhile, the 10-year government bond yield edged up to 7.12% from 7.10% on Tuesday, indicating some pressure on the fixed income market. Traders are now eyeing the Reserve Bank of India's (RBI) potential intervention to curb volatility.
Outlook
Analysts expect the rupee to remain under pressure in the near term, with the possibility of testing the 96 mark if dollar demand persists. The RBI's monetary policy stance and global cues will be key determinants for the currency's trajectory.
