After erasing its early gains, the Indian rupee closed slightly weaker at 83.50 against the U.S. dollar on Monday, as rising crude oil costs exerted pressure on the currency. Market participants pointed to the domestic stock market’s underperformance as an additional factor affecting the mood among investors.
In the realm of foreign exchange, the domestic currency commenced the trading session at 83.43 per dollar. It oscillated to an intra-day zenith of 83.42 and plumbed a nadir of 83.50, before concluding at an unofficial 83.50 per dollar, experiencing a diminutive depreciation of 5 paise compared to its last closure. The previous trading day saw the rupee making a minute step of 1 paisa to close at 83.45 versus the American dollar.
Conversations with forex traders revealed that the Indian rupee was being weighed down by burgeoning demands from importers for U.S. currency as well as a resurgence in oil prices. Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, commented on the prospects of the rupee, “We anticipate the rupee to demonstrate a marginally positive trajectory, buoyed by an uptick in global market risk appetites. Yet, any rebound in crude oil costs could restrain pronounced gains. Emerging geopolitical tensions in the Middle East are likely to have their own impact, dampening the rupee’s performance at greater levels.”
Choudhary also provided expectations on the USD-INR spot price, suggesting it might range between 83.20 to 83.70 rupees.
In the international context, the dollar index, a tool to evaluate the U.S. dollar’s value relative to an ensemble of six currencies, saw a slight growth of 0.06%, reaching 105.09. This movement in the dollar index ostensibly reflected broader global economic trends and sentiment.
Further impacting the currency’s performance, Brent crude futures, the international benchmark for oil prices, observed a 0.80% hike reaching $83.62 per barrel. These fluctuations in crude prices are particularly significant for India, considering the country’s status as a major importer of crude oil, which directly influences its current account deficit and, by extension, the value of its currency.
Switching our view to the domestic equity market, the Sensex nudged forward 17.39 points, or 0.02%, finishing at 73,895.54 points. Contrarily, the broader Nifty index dipped by 33.15 points, or 0.15%, concluding the trading day at 22,442.70 points.
Market dynamics were further informed by the behavior of Foreign Institutional Investors (FIIs), who took on the role of net sellers in the capital markets as of the preceding Friday, liquidating shares to the tune of ₹2,391.98 crore, as per the records from the exchanges.
On to the reserves’ sphere, India’s forex reserves took a dive of $2.412 billion reaching $637.922 billion on April 26, marking the third successive weekly decline, as declared by the Reserve Bank of India (RBI) in their latest update. The week prior had witnessed a $2.28 billion reduction, bringing the total down to $640.33 billion.
Focusing on the macroeconomic stage, the seasonally adjusted HSBC India Services Business Activity Index exhibited a slight downtrend from 61.2 in March to 60.8 in April. Despite this dip, the level remains indicative of one of the most vigorous growth rates the sector has noted in almost fourteen years, signaling underlying economic robustness despite the current currency volatility. This points to the multifaceted nature of the financial landscape in which currency values are influenced by a complex interplay of economic indicators, market activities, and global affairs.
