The rupee fell 9 paise to 85.61 against the US dollar in early trade on Tuesday due to a significant strength in the US currency overseas and a sluggish trend in domestic equity markets.
Forex traders said the rupee continued to be under pressure due to the cautious stance of the Federal Reserve and the “Trump factor” that pushed the dollar index (DXY) and the US 10-year yield higher.
Besides, on the domestic front, slow growth, widening trade deficit and persistent foreign fund outflows have further fuelled the rupee’s depreciation.
At the interbank foreign exchange market, the rupee opened on a weak note at 85.54 and then fell further to 85.61 against the US currency on month-end dollar demand from importers and oil marketing companies, showing a decline of 9 paise over its previous close.
The rupee fell 4 paise to 85.52 against the US dollar on Monday.
According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, the US dollar remained strong in 2024 and posted strong gains against most currencies as investors prepared for fewer US rate cuts and the policies of the incoming Trump administration.
“It will post strong gains against most currencies in 2024 and its gains were boosted by rising Treasury yields, a fall in the yen and European currencies,” Bhansali said.
Bhansali further added that the rupee is expected to remain volatile as Tuesday is the last day for roll-over of positions.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.14 per cent lower at 107.97. Global oil benchmark Brent crude futures rose 0.50 per cent to USD 74.36 per barrel.
In the domestic equity market, the 30-share BSE Sensex was trading 548.90 points, or 0.70 per cent, lower at 77,699.23 in morning trade, while the Nifty was down 138.90 points, or 0.59 per cent, at 23,506.00. Foreign institutional investors (FIIs) sold Rs 1,893.16 crore on a net basis in the capital market on Monday, according to exchange data.
On the domestic macroeconomic front, India’s current account deficit (CAD) narrowed marginally year-on-year to $11.2 billion, or 1.2 per cent of GDP, in the July-September quarter of 2024-25, according to Reserve Bank data released on Friday.
The CAD, an indicator of the country’s external payments scenario, was $11.3 billion, or 1.3 per cent of GDP, during the second quarter of 2023-24.
