The Indian Rupee has depreciated by 3.54% this year, making it the second weakest currency in Asia. The strengthening dollar, selling by foreign investors, and high crude oil prices have put pressure on the rupee.
Dollar vs Rupee: The Indian Rupee has depreciated by 3.54% so far this year. It has become the second worst-performing currency in Asia. The rupee is under continuous pressure against the dollar, primarily due to selling by foreign investors, the strengthening US dollar, and fluctuations in crude oil prices.
Rupee Weakens Further Today
In early trading on Wednesday, the rupee slipped by 15 paise to 88.65 against the dollar. In the interbank foreign exchange market, it opened at 88.61 and soon touched 88.65. On Tuesday, the rupee had closed at 88.50 per dollar. Foreign exchange traders stated that hopes of a US-India trade deal offered some support, but the dollar's strength maintained the pressure.
The Dollar Index, which indicates the US dollar's position against six major currencies, rose by 0.06% to 99.50. This clearly shows that the dollar is strengthening, and emerging market currencies, including the rupee, are under pressure.
Experts' Opinion
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said that the slight appreciation in the rupee on Tuesday was due to an increase in global market risk appetite and a weaker dollar. Hopes of an end to the US government shutdown improved market sentiment, leading to a slight relief for the currency.
Anuj Choudhary believes that in the upcoming sessions, if global markets remain positive and the dollar weakens, the rupee could show some improvement. However, high crude oil prices and importers' dollar demand might limit the rupee's gains. Meanwhile, Dilip Parmar, Research Analyst at HDFC Securities, stated that a major reason for the recent strength was US President Donald Trump's statements, which provided some stability to the market.
Confidence Boosted by Stock Market Rally
Despite the rupee's weakness, the stock market witnessed a rally. Hopes of an end to the US government shutdown boosted investor confidence. On Wednesday, the Sensex surged by 502.82 points to reach 84,374.14, while the Nifty 50 traded with a gain of 144.05 points at 25,839.
In the international market, Brent crude fell by 0.26% to $65 per barrel. However, foreign institutional investors (FIIs) sold Indian equities worth ₹803 crore on Tuesday, further increasing pressure on the rupee.
Why Rupee Pressure Increased
The rupee's weakness is attributed to several factors. The primary reason is the continuous strengthening of the US dollar. As the Dollar Index rises, emerging market currencies come under pressure. The second major reason is selling by foreign investors, who have recently increased their outflows from Indian equities.
Additionally, global economic uncertainty and fluctuations in crude oil prices are also contributing to the rupee's decline. India is an import-dependent economy, so high crude prices directly impact the currency.
Market experts believe that the rupee will remain under pressure for now, but some stability could return in the coming weeks. Progress on the US-India trade deal and the strength of the domestic stock market could support the rupee. If the Dollar Index falls and foreign investor selling decreases, the rupee could even strengthen below the 88 level.
