The Indian rupee plummeted to a historic low against the US dollar, pressured by foreign capital outflows and escalating geopolitical risks, prompting concerns about potential RBI intervention.
Key Points
- The Indian rupee slumped to a record low of 94.05 against the US dollar, driven by heavy foreign institutional investor (FII) outflows.
- Geopolitical tensions in West Asia contributed to investor unease, further weakening the rupee.
- Despite lower global crude oil prices and positive domestic equity market sentiment, the rupee continued its downward trend.
- Analysts expect the Reserve Bank of India (RBI) to intervene and protect the 94 level in the current financial year.
- Foreign institutional investors sold equities worth Rs 8,009.56 crore, adding pressure on the rupee.
The rupee slumped 29 paise to close at record low of 94.05 (provisional) against the US dollar on Wednesday as heavy FII outflows and simmering tensions in West Asia kept investors on the edge.
Even a drop in global crude oil prices, weaker greenback, and positive sentiments in the domestic equity markets could not provide any respite to the local unit, forex traders said.
At the interbank foreign exchange, the local unit opened at 93.94 against the US dollar and traded in the range of 93.86-94.08, before settling at an all-time low of 94.05 (provisional), down 29 paise from its previous close.
The rupee dropped 23 paise to close at 93.76 against the US dollar on Tuesday.
Market Analysis and Expert Opinions
"Markets were in risk-on mode but the rupee was still getting sold against the dollar with the month-end demand keeping the bids high despite the stock markets moving up and dollar index down.
"All risk assets were up against the dollar as markets were expecting some agreement to happen between the two warring countries US-Israel and Iran," Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said.
"We expect the RBI to protect the level of 94 in the current financial year and possibly take it down to 93.30 to 92.80," he said, adding that the rupee is likely to trade in the range of 93.25-94.25.
Global Economic Indicators
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.17 per cent lower at 99.26.
Brent crude, the global oil benchmark, was trading 4.33 per cent lower at USD 99.97 per barrel in futures trade.
Domestic Equity Market Performance
On the domestic equity market front, the Sensex surged by 1,205 points, or 1.63 per cent, to 75,273.45 points, while Nifty was up 394.05 points, or 1.72 per cent, to 23,306.45.
Foreign institutional investors sold equities worth Rs 8,009.56 crore on a net basis on Tuesday, according to exchange data.
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