The Indian rupee ended trading at 86.96 against the US dollar today, marking a decline of 8 paise in the foreign exchange market. The depreciation was driven by sustained foreign fund outflows, a strong US dollar, and cautious sentiment among investors. Market analysts observed increased dollar demand from importers and corporates, which contributed to the rupee’s weakness despite a stable domestic equity market.
The Indian rupee opened at a marginally lower level against the US dollar and remained under pressure throughout the trading session. The demand for the dollar increased as global investors moved towards safe-haven assets amid persistent geopolitical uncertainties and inflation concerns. The US dollar index, which measures the greenback’s strength against a basket of major currencies, remained firm, exerting downward pressure on the rupee.
Forex traders also pointed to the impact of rising crude oil prices on the Indian currency. Higher oil prices increase India’s import bill, leading to higher demand for dollars, which weakens the rupee. Additionally, foreign institutional investors (FIIs) continued to pull out funds from Indian equities, further affecting the local currency’s performance. Over the past few sessions, the rupee has remained in a narrow range, with the Reserve Bank of India (RBI) intervening intermittently to stabilize excessive volatility.
Despite the decline, experts believe the rupee’s depreciation was limited due to the RBI’s steady approach to managing liquidity in the forex market. The central bank has been actively monitoring currency movements and has stepped in with dollar-selling interventions whenever required. However, with the RBI gradually reducing its involvement, the currency’s movement is now more influenced by global factors and market dynamics.
The widening trade deficit is another factor impacting the Indian rupee’s performance. India’s merchandise trade deficit increased in recent months, adding to concerns about external imbalances. A higher trade deficit implies that more foreign exchange is being spent on imports than earned through exports, increasing pressure on the rupee.
Looking ahead, market participants are closely watching key global and domestic economic indicators, including US Federal Reserve policy decisions, inflation trends, and foreign investment flows. Experts suggest that the rupee’s movement in the coming weeks will largely depend on global risk sentiment, crude oil price trends, and the RBI’s stance on foreign exchange management. If the US dollar continues to strengthen amid expectations of prolonged high interest rates, the Indian rupee may face further downside risks.
For now, forex traders expect the rupee to trade within a narrow range, with occasional fluctuations driven by external developments. As global markets remain volatile, investors and policymakers will continue to monitor key economic trends to assess their impact on Indian rupee.
