The Indian rupee observed a modest fallback in the foreign exchange market, registering a depreciation of seven paise to reach 83.38 against the U.S. dollar during early trade on April 12. This decline came as a repercussion of a blend of factors including a downturn in domestic share markets and the relentless climb of global crude oil prices. The prevailing strength of the American currency on the international stage also played a role in undermining investor confidence in the Rupee.
At the start of the day in the interbank foreign exchange market, the Rupee commenced its trading journey slightly lower at 83.36 against the dollar before succumbing to a lower ebb of 83.38 in early transactions. This change reflected a slight retreat from its prior closing figure of 83.31 against the U.S. dollar. It is worth mentioning that on the previous trading day, April 10, the Indian Rupee concluded the day’s business without any notable change.
The financial ecosystem within the country experienced a halt on April 11, as markets ranging from stocks, money, commodities, to derivatives remained closed in observance of the festive day of Eid-Ul-Fitr.
On the international economic front, the dollar index, a metric evaluating the U.S. dollar’s potency against a group of six other prominent currencies, experienced a rise, albeit marginal, at 0.07%, to reach 105.35. The increase in the index suggested a robustness of the dollar, casting additional shadows on the local currency’s performance.
Taking the spotlight in the commodities market, the Brent crude futures, which act as a global oil benchmark, experienced an uptick of 0.58%, priding themselves at a substantial $90.26 per barrel. Analysts pinpoint geopolitical tensions in the Middle East as the catalyst behind the rise, especially following Iran’s vow to retaliate for an alleged air strike on its diplomatic establishment in Syria—a move that triggers concerns about potential interruptions in crude shipments emerging from the region. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, expressed continued concerns about the high oil prices due to these regional tensions.
Mr. Bhansali also provided insight into the currency market’s dynamics, revealing that the Rupee had touched a weakness of 83.40 in the Non-deliverable Forwards (NDF) market on the evening of April 10. However, it staged a partial recovery by the next trading morning, showing an opening at 83.32. He suggested that the Reserve Bank of India may step in to discourage the Rupee’s depreciation beyond the 83.40 mark, prompting exporters to contemplate selling at this level as a hedge for their near-term exports.
The ramifications were simultaneously felt in the domestic equity markets, with the benchmark 30-share BSE Sensex trading down by 374.49 points, marking a 0.50% decline to settle at 74,663.66 points. Similarly, the broader Nifty of the National Stock Exchange also suffered a setback, down 0.54% or 123.90 points, ultimately resting at 22,629.90 points.
Amidst this scenario, Foreign Institutional Investors (FIIs) appeared as net purchasers in the capital market on the preceding Wednesday, buying shares amounting to ₹2,778.17 crore, as per the data released by the exchanges.
It is within this turbulent economic panorama that the Indian Rupee’s latest dip is gauged, signaling an environment marked by cautious trading, dynamic policy decisions, and a vigilant eye on both domestic economic indicators and global geopolitical developments.
