Amid West Asia Tensions, Rupee's Decline Continues; Loses Ground Against Dollar Once Again

The price of the international benchmark, Brent crude, fell by 1.32 percent to stand at $102.0 per barrel. According to stock market data, Foreign Institutional Investors (FIIs) were net sellers on Tuesday, offloading shares worth ₹4,741.22 crore.

Dollar vs Rupee: Amidst rising tensions in the Middle East, the Indian Rupee continues its downward trajectory. The Rupee remains under pressure due to the strengthening US Dollar and a surge in crude oil prices. On the third trading day of the week—Wednesday—the Rupee slipped by another three paise to reach the level of 92.43 against the Dollar.

The domestic currency is under pressure due to capital outflows by foreign investors and the strengthening stance of the US Dollar, driven by the ongoing conflict in West Asia. According to foreign exchange traders, a slight softening in global crude oil prices and a positive start in domestic equity markets have, for the time being, prevented a steeper decline in the Rupee.

Why is the Rupee Falling?

In the interbank foreign exchange market, the Rupee opened at 92.42 against the Dollar and subsequently slipped to 92.43 per Dollar, marking a decline of three paise from its previous closing price. Last week, during trading on Thursday, the Rupee had touched its lowest intraday level of 92.47 against the Dollar.

However, it eventually closed at an all-time low of 92.40 per Dollar. Meanwhile, the Dollar Index—which gauges the US Dollar's strength against a basket of six major currencies—rose by 0.03 percent to reach 99.60.

In domestic equity markets, the Sensex rose by 373.53 points (0.49 percent) to reach 76,444.37 points in early trade, while the Nifty gained 114.40 points (0.49 percent) to stand at 23,695.55 points. The price of the international benchmark, Brent crude, fell by 1.32 percent to stand at $102.0 per barrel. According to stock market data, Foreign Institutional Investors (FIIs) were net sellers on Tuesday, offloading shares worth ₹4,741.22 crore.

What Do Experts Say?

According to Anuj Chaudhary, a research analyst at Mirae Asset Sharekhan, the primary reasons for the decline in the domestic currency are the surge in crude oil prices and continuous capital outflows by Foreign Institutional Investors (FIIs). However, a recovery in domestic markets and a slight softening of the US dollar have limited the rupee's sharp decline.

He added that expectations regarding the reopening of the Strait of Hormuz, coupled with potential intervention by the Reserve Bank of India, could provide support to the rupee at lower levels. Additionally, investors will be keeping a close watch this week on the monetary policy decisions of the Federal Open Market Committee (FOMC), the European Central Bank (ECB), the Bank of Japan, and the Bank of England. According to him, the spot price of the rupee against the US dollar is likely to trade within the range of ₹92.10 to ₹92.75.