Rupee Weakens Slightly Against US Dollar in Early Trade

The Indian rupee has opened lower and carried forward losses against the US currency in early trade today, Wednesday, under pressure from a rising American currency and higher international oil prices.

It was trading at 85.63 against the US dollar, the local unit registering a loss of 23 paise from its last close of 85.40. The rupee opened the day's trade at 85.59 and hit an initial low of 85.71 before settling marginally at the 85.63 mark.

Factors Behind the Downturn

Some key factors driving the dip have been identified by forex analysts. One main factor is the strengthening of the US dollar globally.

The dollar index, used to compare the strength of the dollar to a basket of six currencies, is trading significantly higher by 0.30 per cent at 99.72. This increase in the greenback is due to the combination of several factors, such as bettering consumer confidence figures from the United States and a softening Japanese yen, itself weakening from a steep drop in long-term bond yields.

At the same time, a crude oil price uptrend is also down in the local currency. International benchmark Brent crude has also climbed, advancing 0.41 percent to $64.35 a barrel in futures trade. Being one of the major importers of oil, India's currency is vulnerable to rising trends in global crude benchmarks.

Furthermore, increased dollar demand from exporters and banks towards the end of the month is adding to the pressure on the rupee. This demand is occurring despite foreign fund inflows remaining relatively muted, alongside mixed sentiment observed in the domestic equity markets.

Market Context

Investors are proceeding cautiously today, awaiting fresh cues from both domestic and international macroeconomic data releases.

While the currency market is weak, the domestic equity indices are trading with slight gains. The 30-share BSE Sensex is higher by 23.86 points, or 0.03 per cent, at 81,575.49, and the Nifty 50 index has crept up by 28.90 points, or 0.12 per cent, to 24,855.10 in early trade.

Foreign Institutional Investors (FIIs) have bought equities to the tune of ₹348.45 crore on a net basis, but analysts indicate that this has not been enough to offset the overall pressures from the dollar appreciation and oil prices affecting the rupee today.

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