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    Rupee Weakens Further, Slips to 90.44 Against U.S. Dollar in Early Trade

    3 days ago

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    The Indian rupee continued its downward trend for the third consecutive trading session on Friday, slipping by 10 paise to trade at 90.44 against the U.S. dollar in early hours. Persistent foreign fund outflows and sustained strength in the American currency weighed on the domestic unit, even as supportive factors such as lower crude oil prices and a positive equity market limited sharper losses.

    At the interbank foreign exchange market, the rupee opened slightly weaker at 90.37 against the dollar before losing ground further. Market participants said cautious sentiment ahead of global monetary policy cues and renewed pressure on emerging market currencies contributed to the decline.

    Foreign Fund Outflows Add Pressure

    Currency traders pointed out that continued selling by foreign institutional investors (FIIs) has remained a major factor behind the rupee’s weakness. According to exchange data, overseas investors sold Indian equities worth several thousand crore rupees earlier this week, reflecting risk-off sentiment amid global uncertainty.

    “Capital outflows have kept the rupee under pressure despite a supportive domestic equity market. Investors are closely tracking global interest rate expectations and economic data from the United States,” a forex dealer at a private bank said.

    The rupee had closed weaker in the previous session after posting losses earlier in the week as well. Market activity on Thursday remained muted as foreign exchange markets were shut due to a local holiday in Mumbai.

    Dollar Strength and Global Factors

    The U.S. dollar maintained its firm footing against major global currencies, supported by recent inflation data from the United States. Analysts said the data reduced expectations of an immediate interest rate cut by the U.S. Federal Reserve, strengthening the greenback and putting pressure on currencies like the rupee.

    The dollar index, which tracks the U.S. currency against a basket of six major currencies, hovered near the 99 mark during early Asian trade. Although marginally lower on the day, it remained close to recent highs, reflecting continued investor preference for dollar assets.

    “Any delay in U.S. rate cuts tends to support the dollar and weighs on emerging market currencies. This trend is clearly visible in the rupee’s recent movement,” a currency strategist said.

    Trade Deficit Data in Focus

    Another factor influencing sentiment was India’s trade data released earlier this week, which showed a marginal widening of the country’s trade deficit in December. Higher import bills compared to exports added to concerns over external balances, contributing to pressure on the rupee.

    Economists, however, said the increase in the trade gap was not alarming but cautioned that sustained widening could impact currency stability if global conditions remain volatile.

    Crude Oil and Equity Markets Provide Support

    Despite the negative cues, a sharper fall in the rupee was avoided due to lower global crude oil prices. Brent crude, the international benchmark, traded below recent highs, offering some relief to India, which is a major oil importer.

    Lower oil prices help reduce pressure on the country’s import bill and improve demand for the rupee over time. “If crude prices remain soft, it could provide a cushion to the currency in the near term,” traders noted.

    On the domestic equity front, Indian stock markets opened on a positive note, with benchmark indices registering gains in early trade. A firm equity market generally supports the local currency by attracting domestic participation, even though foreign investors remained cautious.

    Near-Term Outlook

    Market experts expect the rupee to remain range-bound in the near term, with global developments playing a decisive role. Key factors to watch include upcoming U.S. economic data, signals from the Federal Reserve on interest rates, and trends in foreign portfolio flows.

    “While the rupee may face intermittent pressure, strong foreign exchange reserves and stable macroeconomic fundamentals should help prevent excessive volatility,” an analyst said.

     

    As global markets continue to navigate uncertainty over inflation, growth, and monetary policy, currency traders are likely to remain cautious. For now, the rupee’s movement reflects a balance between global headwinds and domestic support factors, with investors closely monitoring cues from overseas markets.

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