The Indian rupee weakened by 3 paise to close at 85.37 against the US dollar on Wednesday, extending its fall for the second day, in comparison to its previous close of 85.33 on Tuesday. This significant depreciation comes amid various global and domestic economic factors influencing the currency markets.
The domestic currency opened 28 paise weaker at 85.62 against the US dollar, this comes as dollar staged recovery on Wednesday.
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"The rupee had little room to move due to month-end dollar demand, mainly from the Importers from the oil and manufacturing sectors, who aggressively stepped in to hedge their dollar exposure, fearing that any further surge in the greenback could cause the USDINR pair to surge," said Amit Pabari, managing director at CR Forex Advisors.
According to Pabari, investors will be focusing on India's upcoming industrial and manufacturing production data, due later on Wednesday, with expectations on the downside amid the Trump administration's reciprocal tariffs, and first quarter GDP figures set for release this Friday.
In addition, he pointed that weak equity markets, muted foreign inflows, and a rebound in crude oil prices revived concerns about India's widening trade deficit.
The rise in dollar was driven by Japan's potential cut in bond issuance, which triggered a spike in US Treasury yields. That move drove global investors into dollar-denominated assets, he added. However, long-term dollar weakness driven by rising fiscal deficit concerns, policy instability, rising uncertainty, and weak economic conditions is going to support the emerging markets, including the rupee.
Additionally, on Wednesday, crude rose with Brent crude - the global benchmark for crude oil - rising 0.66% to $64.51 per barrel ahead of an OPEC+ meeting that will decide on the supply policy and with markets considering the prospect for additional US sanctions on Russia. This also follows US ban on Chevron from exporting Venezuela crude under a new authorisation on its assets there, raising the prospects of a tighter supply.
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