The Indian rupee slumped by 50 paise to close at 95.75 against the US dollar on Friday, marking a significant decline driven by persistent foreign fund outflows and subdued sentiment in domestic equity markets, according to forex traders.
Factors Behind the Rupee's Fall
Heavy selling by foreign institutional investors (FIIs) continued to put pressure on the local currency, as they pulled out funds from Indian equities amid global uncertainty. Additionally, weak cues from domestic stock markets further dampened investor confidence, leading to a weaker rupee.
The domestic unit opened lower and remained under pressure throughout the trading session, finally settling at 95.75, down 50 paise from its previous close of 95.25.
Impact on Importers and Exporters
A weaker rupee makes imports more expensive, particularly for crude oil and other commodities, potentially fueling inflation. On the other hand, exporters may benefit from better realization on their overseas earnings.
Forex traders noted that the rupee's movement will continue to be influenced by global factors, including the US dollar's strength and the Federal Reserve's monetary policy stance.
The local unit has been under pressure in recent weeks, with FII outflows exceeding $1 billion in June alone. Analysts expect further volatility in the near term as global risk sentiment remains fragile.
