Rupee's Continuous Decline
The rupee experienced its sixth consecutive session of decline, closing at 95.88 against the US dollar on Tuesday. This 34 paise drop was primarily driven by the escalating conflict in the Middle East and a significant surge in Brent crude oil prices, which reached $108 per barrel.
Factors Influencing the Decline
Forex traders noted that the increased demand for dollars from oil importers, due to rising crude prices, sparked concerns over inflation and India's external trade balance. Additionally, weak domestic markets, a strong US dollar, and worries over rising global treasury yields further dented investor sentiment.
Expert Analysis
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, commented, "We expect the rupee to trade with a negative bias on risk‑off sentiments in global markets and worries over rising global treasury yields. Rising global crude oil prices amid fears over supply disruption and a strong dollar may also pressurise the rupee."
However, Choudhary also noted that any intervention by the RBI may support the rupee at lower levels. Traders are likely to take cues from ADP weekly employment and Empire State manufacturing index data from the US.
Dilip Parmar, Research Analyst at HDFC Securities, stated, "The rupee extended its losses for the sixth consecutive session, dragged down by a persistent surge in global bond yields and rising crude oil prices amid ongoing supply disruptions."
Market Performance
On the domestic equities market front, Sensex tanked 777.94 points to settle at 74,003.82, while the Nifty dropped 279.50 points to 23,118.60. Foreign institutional investors (FIIs) offloaded equities worth Rs 2,977.86 crore on a net basis on Tuesday.
Context and Implications
The rupee's decline is a reflection of broader market sentiments and global economic factors. With Brent crude touching $108 per barrel, increased dollar demand from oil importers raised concerns over India's external balance and inflation. The situation is further complicated by the ongoing conflict in the Middle East and its potential impact on oil supplies.
Future Outlook
Investors are cautiously awaiting the Federal Open Market Committee (FOMC) meeting decision on Wednesday. The USD‑INR spot price is expected to trade in a range of 95.75 to 96.15. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 99.61, higher by 0.22 per cent.