The Indian rupee extended its losses against the US dollar on Thursday, closing 8 paise weaker at 83.87 (eighty-three rupees eighty-seven paise) as the American currency maintained its strength in global markets.
What Drove the Rupee's Decline?
Forex traders identified multiple factors working against the Indian currency:
- Robust US Dollar: The dollar index, which measures the greenback against six major currencies, hovered near 105.40, making dollar-denominated imports more expensive
- Elevated Crude Prices: Brent crude futures traded around $85 per barrel, raising concerns about India's import bill since the country is a major oil importer
- Foreign Fund Outflows: Sustained selling pressure from foreign institutional investors added to the rupee's weakness
Market Opening and Trading Pattern
The domestic currency opened weak at 83.85 against the US dollar at the interbank foreign exchange market, compared to its previous close of 83.79. Throughout the trading session, it moved within a tight range, touching an intraday high of 83.84 and a low of 83.87 before settling at the day's lowest point.
Broader Market Context
Interestingly, the rupee's decline occurred despite positive momentum in domestic equity markets. The BSE Sensex surged by 632 points (0.80%) to reach 79,476, while the NSE Nifty climbed 176 points (0.73%) to 24,142.
This divergence highlights how global factors sometimes outweigh domestic market sentiment in currency movements. The US dollar's broad-based strength and rising crude oil prices created headwinds that the local stock market rally couldn't overcome.
Expert Outlook and RBI's Role
Market analysts suggest that the Reserve Bank of India (RBI) likely intervened to prevent sharper depreciation, using its substantial foreign exchange reserves to smooth volatility. The central bank's vigilant approach has helped maintain relative stability in the rupee despite global uncertainties.
Looking ahead, traders will closely monitor:
- US economic data and Federal Reserve policy signals
- Global crude oil price trends
- Foreign institutional investment patterns
- RBI's intervention strategy
The rupee's movement continues to reflect the delicate balance between domestic economic strength and global financial currents, with all eyes on how these factors evolve in the coming sessions.
