On Tuesday, the Indian rupee depreciated by 11 paise to 83.32 against the US dollar. This decline was attributed to a subdued trend in domestic equities and an increased demand for the dollar from importers. Forex traders noted that foreign fund outflows and the demand for the US dollar from importers influenced investor sentiments.
The rupee opened at 83.28 against the dollar at the interbank foreign exchange market and settled at 83.32, marking a provisional decline of 11 paise from the previous close. On the previous trading day (Monday), the rupee had depreciated by 5 paise to 83.21 against the US dollar.
Factors contributing to the depreciation included foreign institutional investors (FIIs) being net sellers in the capital markets on Monday, offloading shares worth Rs 855.80 crore. The dollar index, which measures the strength of the US dollar against a basket of six currencies, was 0.11% higher at 101.44 on Tuesday.
The domestic equity market also experienced a decline, with the Sensex dropping 379.46 points (0.53%) to settle at 71,892.48 points, and the Nifty falling 76.10 points (0.35%) to 21,665.80 points. The increase in crude oil prices, along with geopolitical tensions and the ongoing conflict in the Middle East, contributed to the positive trend in the US dollar.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, stated that the rupee's weakness was influenced by domestic market conditions and the strength of the US dollar. He highlighted that the surge in crude oil prices also weighed on the rupee.
Looking ahead, traders are expected to monitor manufacturing PMI and construction spending data from the US, as well as manufacturing index data from India. Choudhary suggested a negative bias for the rupee due to weak domestic equities, a stronger US dollar, and the impact of rising crude oil prices. However, any FII outflows could potentially support the rupee at lower levels. The expected trading range for USD-INR is between 83.10 and 83.70.
(With Agency Inputs)
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