The Indian rupee commenced trading on a weaker note against the US dollar on Friday, extending its recent losses. The local currency opened lower by seven paise at 89.97 against the greenback, pressured by persistent selling from foreign investors and an uptick in global crude oil benchmarks.
Key Factors Driving the Rupee's Decline
Market analysts pointed to a confluence of domestic and global headwinds. Sustained selling by Foreign Institutional Investors (FIIs) in the equity markets, driven by muted sentiment and US tariff concerns, created significant demand for dollars. Simultaneously, Brent crude futures rose by 0.53% to $62.32 per barrel, raising India's import bill and further pressuring the currency.
The rupee had previously closed at 89.90 on Thursday, marking a three-paise decline. The day witnessed substantial volatility, with the Reserve Bank of India (RBI) reportedly intervening. "There was huge volatility in the rupee market on Thursday as the RBI sold dollars at 89.99 and brought rupee up to 89.73 and then FPIs bought dollars," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
He further explained the central bank's dynamic, noting, "The RBI has been capping the dollar upside presently, creating huge oversold positions for itself which could keep the dollar well bid at lower levels as the RBI would try to square up positions."
Broader Market Sentiment Remains Cautious
The bearish currency sentiment spilled over into the domestic equity markets. Reflecting the cautious mood, key indices traded in the red. The BSE Sensex fell 78.84 points to settle at 84,102.12, while the NSE Nifty declined by 21.50 points to 25,850.85.
Exchange data underscored the extent of foreign capital outflow, revealing that FIIs sold Indian equities worth Rs 3,367.12 crore on Thursday. This continued exodus of foreign funds remains a primary concern for market stability.
Global Market Context
In global markets, the dollar index, which measures the US currency against six major rivals, held steady at 98.93. This firmness in the dollar overseas added to the downward pressure on emerging market currencies like the rupee. The combination of a strong dollar, elevated oil prices, and risk-off sentiment among global investors created a challenging environment for the Indian currency.
The rupee's movement highlights the ongoing sensitivity of emerging market assets to global fund flows and commodity price swings. Market participants will closely monitor further FII activity, RBI's intervention strategy, and crude oil price trajectories for near-term direction.
