The Indian rupee depreciated by 47 paise to settle at 95.73 against the US dollar on Tuesday, marking a significant decline amid sustained strength in the American currency and elevated crude oil prices. The local currency opened weaker at 95.50 and touched an intraday low of 95.75 before closing at 95.73, compared to its previous close of 95.26.
Factors Behind the Rupee's Fall
Forex traders attributed the rupee's weakness to a robust US dollar index, which remained elevated on expectations of further interest rate hikes by the Federal Reserve. Additionally, a surge in global crude oil prices weighed on the rupee, as India is a major importer of oil. Higher oil prices increase the country's import bill and put pressure on the current account deficit.
Impact of Global Cues
On the global front, the dollar index — which measures the greenback against a basket of six major currencies — rose 0.2% to 105.30, making other currencies less attractive. Meanwhile, Brent crude futures climbed 1.5% to $92.50 per barrel, adding to inflationary concerns. Analysts noted that foreign fund outflows from Indian equities also contributed to the rupee's decline.
Domestic Market Performance
In the domestic equity market, the BSE Sensex ended 150 points lower at 65,450, while the NSE Nifty declined 45 points to 19,500, reflecting weak investor sentiment. The sell-off in equities prompted foreign institutional investors (FIIs) to pull out funds, further pressurizing the rupee.
Outlook for the Rupee
Market participants expect the rupee to remain under pressure in the near term, given the strong dollar and volatile oil prices. The Reserve Bank of India (RBI) is likely to intervene through dollar sales to prevent excessive volatility, but the overall trend remains bearish. Traders will watch for US inflation data and Fed commentary for further cues.
