Rupee Declines 8 Paise Against US Dollar Amid Foreign Fund Outflows
The Indian rupee weakened by 8 paise on Monday, settling at 90.74 against the US dollar, as a strong American currency and foreign fund outflows exerted downward pressure on the domestic currency. Forex traders noted that lower crude oil prices and positive trends in domestic equity markets helped prevent a more significant decline.
Market Dynamics and Previous Session Performance
In the previous trading session on Friday, the rupee had depreciated by 5 paise, closing at 90.66 against the dollar. This continued weakness reflects ongoing market volatility and external economic factors influencing currency movements.
Expert Analysis and Market Sentiment
Jateen Trivedi, an analyst at LKP Securities, commented that the rupee traded largely flat during the session, with market participants adopting a cautious stance. He attributed the currency's stability to a recovery in the secondary market, which provided some support amid the broader pressures.
Global Commodity Trends and Their Impact
Brent crude futures, a key benchmark for oil prices, were trading 0.47% lower at $67.43 per barrel during the session. The decline in crude oil prices offered some relief to the rupee, as lower oil import costs can reduce pressure on India's trade deficit and currency valuation.
Factors Influencing the Rupee's Movement
Key Drivers of the Decline:
- Strong US Dollar: The American currency's strength globally made imports more expensive and contributed to the rupee's depreciation.
- Foreign Fund Outflows: Withdrawal of foreign investments from Indian markets increased demand for dollars, further pressuring the rupee.
Mitigating Factors:
- Lower Crude Oil Prices: Reduced oil prices helped curb the rupee's fall by easing concerns over India's import bill.
- Positive Domestic Equities: Gains in the stock market provided a buffer, supporting investor sentiment and limiting currency volatility.
The interplay of these factors highlights the complex dynamics shaping the forex market, with the rupee navigating between global headwinds and domestic strengths.
