In a day marked by cautious trading and simmering global tensions, the Indian rupee fell 14 paise to settle provisionally at 83.57 against the formidable U.S. dollar. This latest depreciation occurred on April 16, reflecting unease in domestic equity markets and a stronger dollar in the face of geopolitical stresses.
Market experts highlighted that the risk sentiment has been dampened, further influenced by recent capital outflows from foreign investors. The currency opened the trading session slightly stronger at 83.51 but could not sustain this level, culminating in its closure at the weaker end of the day’s trade.
Just a day prior, the domestic currency had experienced a lesser decline, ending Monday’s trade with a 6 paise drop against the dollar. Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, contributed perspective on the matter, citing the rise of 10-year U.S. bond yields to a peak of 4.66 percent – a height not seen since the past November. Weak local markets, coupled with the ongoing geopolitical tension, exerted additional pressure on the rupee.
The dollar index, a measure of the greenback’s performance against six other major currencies, saw a marginal 0.02% increase, reaching 106.23. According to Choudhary, several factors contributed to the U.S. dollar’s ascent to a five-month summit, including a faltering yuan, lackluster retail sales figures, and a heightened demand for safe-haven currencies, spurred by increased tensions between Iran and Israel.
In the commodities market, the Brent crude oil futures dipped by 0.40 percent to stand at USD 89.74 per barrel, reflecting the intertwined nature of currency and commodity markets.
Choudhary projected a continuation of the rupee’s weakness in face of geopolitical uncertainties potentially impacting risk-sensitive currencies and propulsion of the U.S. dollar. “Rising global crude oil prices and an uptick in U.S. treasury yields amid postponement of rate cuts in the U.S. are likely to put the rupee under strain,” he noted, setting the expected trading boundaries for the USD/INR pair between 83.30 and 83.80.
In the backdrop of forex movements, the domestic equity market incurred substantial losses. The BSE Sensex closed down by 456.10 points, a decrease of 0.62%, with the benchmark settling at 72,943.68 points. Meanwhile, the broader Nifty shed 124.60 points or 0.56%, ending at 22,147.90 points.
Foreign Institutional Investors (FIIs) demonstrated their trepidation, emerging as net sellers in the capital markets by offloading shares worth Rs 3,268.00 crore as per the available exchange data.
On India’s domestic front, wholesale inflation experienced a minor increment, achieving a three-month high of 0.53% in March. This increase was driven by rising prices in key commodities such as vegetables, potatoes, onions, and crude oil, comparing to the 0.20% inflation reported in the preceding month.
Exports also felt the impact of the current global environment. India’s merchandise exports exhibited a marginal decline in March, reaching $41.69 billion. Furthermore, the fiscal year witnessed a cumulative drop of 3.11% to $437.06 billion in exports, attributed primarily to the sustained geopolitical unrest and a subdued global trade atmosphere.
As currency valuations continue to experience the ripples of international developments, market participants remain vigilant, closely monitoring the dynamic landscape of foreign exchange and global economic indicators.
