Amidst a falling market and fleeing foreign investors, the rupee showed such strength that the entire world was surprised.
Amidst a falling market and fleeing foreign investors, the rupee showed such strength that the entire world was surprised.
Rupee vs Dollar: According to Dr. Aastha Ahuja, Associate Professor, Department of Economics, Aryabhatta College, Delhi University, foreign investor confidence in the Indian market is currently weak.
Indian Currency: On Friday, the last trading day of last week, the Indian rupee recorded a massive decline of 98 paise, its biggest single-day decline in the last three years. Following this, the rupee reached an all-time low of 89.66 against the US dollar. However, the rupee recovered rapidly thereafter.
Amid continued selling by foreign investors, falling crude oil prices and direct intervention by the RBI played a key role in preventing the rupee from weakening further. On Monday, the first trading day of the week, the rupee strengthened by 50 paise to close at 89.16. On Tuesday, the rupee also rose by 11 paise to reach 89.05.
Strong Rupee Movement
According to market experts, the rupee continues to be under pressure due to the strengthening of the dollar. Dilip Parmar, research analyst at HDFC Securities, said the rupee gained the most among Asian currencies due to potential central bank intervention and rebalancing in the MSCI index. However, foreign fund outflows, a widening trade deficit, and a strengthening dollar index weakened the rupee's sentiment.
Last Friday, selling in overseas markets and trade uncertainties led to strong demand for the dollar, leading to a sharp decline in the rupee. The previous biggest single-day decline was 99 paise on February 24, 2022.
How will the rupee perform going forward?
According to Dr. Aastha Ahuja, Associate Professor in the Department of Economics at Aryabhatta College, Delhi University, foreign investor confidence in the Indian market is currently weak, and uncertainty may persist until a trade deal is reached. The widening trade deficit is also putting pressure on the rupee.
She says the rupee's weakness is impacting not only the market but also consumers and students studying abroad, as the cost of remittances to them has increased. However, in the case of a trade deal, the chances of the rupee falling to the level of 86–87 will increase.
