The Indian rupee weakened by 67 paise against the US dollar on Wednesday, settling at 95.23 per dollar, as persistent demand for the greenback and a decline in domestic equities weighed on the local currency.
Rupee opens lower, trades in wide range
At the interbank foreign exchange market, the rupee opened at 94.67 against the American currency and moved in a range of 94.60 to 95.29 during the session. The currency finally closed at 95.23, marking a sharp fall from the previous close of 94.56.
Factors behind the decline
Forex traders attributed the rupee's weakness to strong demand for the US dollar from importers and foreign banks. Additionally, a sell-off in domestic equity markets dampened investor sentiment, prompting foreign portfolio outflows.
According to analysts, the rupee also came under pressure due to a strengthening dollar index overseas, as global risk aversion increased amid geopolitical uncertainties.
Impact on trade and economy
A weaker rupee makes imports costlier, potentially fueling inflation, while export-oriented sectors may benefit from improved competitiveness. The Reserve Bank of India is expected to monitor the situation closely and may intervene through dollar sales to curb excessive volatility.
Market participants will watch for further cues from global central bank policies and domestic macroeconomic data in the coming sessions.
