Slide Spree: Rupee Closes Weak Against US Dollar
The domestic currency had opened weaker against the US dollar on Wednesday, falling by 5 paise to trade at 86.58.
The rupee ended weaker against the US dollar on Wednesday. It weakened by 2 paise to close at 86.55.
The domestic currency had opened weaker against the US dollar on Wednesday, falling by 5 paise to trade at 86.58. This marks the continuation of its downward trajectory, following a 19 paise drop on Tuesday that brought the currency to 86.53.
The rupee's weakness is driven by ongoing global economic concerns and market volatility. To support liquidity within the banking system, the Reserve Bank of India (RBI) announced a series of special measures on Monday. These measures, which include open market operations purchases, longer-tenure variable rate repo auctions, and foreign exchange market interventions, are expected to inject around Rs 1.5 lakh crore into the banking system. While these steps are designed to provide some support to the rupee, it remains under pressure in the face of global uncertainties.
Exporters are advised to hedge small amounts near the 86.60 level, which is currently being supported by the RBI, while importers are encouraged to purchase dollars on dips, according to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
Bhansali also indicated that the recent fluctuations in the currency have been fuelled by foreign portfolio investors purchasing dollars to fund equity sales worth Rs 5,000 crore on Monday. While RBI's interventions have contained the rupee’s decline to some extent, the currency remains vulnerable to external pressures.
Global market dynamics are also influencing the rupee's performance. Brent oil prices rose as investors considered the potential impact of US tariffs on Canada and Mexico, along with an increase in US weekly crude inventory. Additionally, weak economic data from China has dampened global demand expectations, contributing to broader market uncertainty.
As global markets await key events, including the Federal Reserve’s meeting, US GDP data, US PCE prices, and the European Central Bank’s policy meeting, the rupee's performance is likely to be influenced by these developments. Bhansali noted that the currency is expected to continue trading within a narrow range, awaiting further clarity from these global factors.
