Rupee Remains Under Pressure, Closes Weak Against Dollar

The Indian rupee closed weaker against the US dollar on Monday. The domestic currency weakened by 13 paise to close at 86.34 against the US dollar.

It opened on a weaker note, depreciating 14 paise to 86.35 against the greenback. Last week, the currency had performed stronger throughout the week and closed stronger by 26 paise at 86.21 on Friday, according to Bloomberg data.

The dollar index was trading 0.05% lower at 107.38 at 03:33 p.m. on Monday. Crude oil prices were trading lower too. Brent crude was trading 0.09% lower at $78.43 per barrel at 03:20 p.m.

Crude oil prices faced downward pressure on Friday after US President Donald Trump urged Saudi Arabia to lower prices in order to help curb Russia's ongoing conflict. Trump also warned of potential sanctions on Russia unless it de-escalates the war.

Market participants are also anticipating the US Federal Reserve to keep interest rates unchanged during its January meeting. The FOMC press conference will be closely watched for any signals regarding the US rate path, according to Kunal Sodhani of Shinhan Bank India.

Exporters are advised to consider hedging small amounts around the 86.60 level, which is being supported by the Reserve Bank of India. Importers were advised to buy the dips as the currency moves lower, according to Anil Bhansali, executive director at Finrex Treasury Advisors LLP.

UBS Group AG recently suggested that investors short the Indian rupee and adopt an underweight stance on Indian stocks. According to UBS, India's $4 trillion economy is entering a "structural slowdown", driven by weak credit growth, declining foreign direct investment, and a general deceleration in the country's economic performance.