The rupee weakened on Monday, recording a 10 paise decrease to end at 83.48 against the US dollar provisionally, as market participants displayed caution in the lead-up to the US Federal Reserve’s policy decision announcement. While the negative trend was evident, the fall was mitigated by the positive mood in the domestic stock market and the relaxing of crude oil prices internationally, according to forex market analysts.
At the opening of the interbank foreign exchange market, the Indian currency commenced on a weaker note at 83.39 and saw an intraday decline, reaching as low as 83.51 against the US dollar. By the session’s close, it had provisionally finalized at 83.48, marking a drawback of 10 paise from its previous closing.
This downtrend continues from Friday, where the rupee had already diminished by 10 paise, closing at 83.38 against the greenback. Concurrently, the dollar index, which measures the dollar’s performance against a portfolio of six major world currencies, experienced a drop of 0.26 percent down to 105.53, reflecting the tentative stance of investors in light of the upcoming monetary policy decisions by the US Federal Reserve, as well as the release of key global and domestic macroeconomic figures this week.
The FOMC meeting is scheduled to commence on Tuesday, with great market anticipation directed towards the interest rate verdict expected to be disclosed on May 1.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, provided insights into the currency’s movement. He noted that the rupee fell due to a positive traction in the US dollar and persistent outflows of Foreign Institutional Investors (FII). However, he indicated that such downward trends were tempered by the positive trajectory of domestic equities and the drop in crude oil prices.
Choudhary further expressed expectations for the rupee to bear a slight negative bias in light of selling pressure from foreign investors and possible rebound in crude oil prices. Nonetheless, enhanced global risk sentiment and diminished geopolitical tensions in the Middle East might provide a supportive floor for the rupee.
Moreover, he anticipated the USD-INR spot price to fluctuate within a range of Rs 83.20 to Rs 83.70. The impact of falling oil prices was echoed by Brent crude futures which slipped by 0.53 percent to USD 89.03 per barrel.
Mohammed Imran, another Research Analyst at Sharekhan by BNP Paribas, echoed concerns about crude oil demand, which might face challenges from the US amid renewed fears of inflation. Conversely, he noted that geopolitical risks seemed to have eased significantly, which consequently has reduced some of the risk premium incorporated into the market.
As for the performance of the Indian equity market, there were positive signs with the benchmark Sensex climbing a striking 941.12 points, equivalent to 1.28 percent, closing at 74,671.28, while the Nifty surged 223.45 points, or 1.00 percent, to end the day at 22,643.40.
According to the latest exchange data, foreign institutional investors continued their retreat from the capital markets on Friday, offloading shares worth Rs 3,408.88 crore. This investor behavior reflected in the rupee’s valuation.
Furthermore, India’s forex reserves displayed a decrease of USD 2.282 billion, settling at USD 640.334 billion for the week concluded on April 19, marking it as the second consecutive week of decline, as reported by the Reserve Bank of India (RBI) last Friday.
