Indian Rupee Dips to 96.43 Amid Capital Outflows and Geopolitical Uncertainty
The Indian rupee weakened on Tuesday, dropping 8 paise to settle at 96.43 against the US dollar. This decline was driven by sustained foreign capital outflows and lingering uncertainty over a potential US-Iran deal. The rupee opened at 96.29 and fluctuated between 96.29 and 96.45 before closing at its provisional rate of 96.43. The previous day, the rupee had fallen 10 paise to 96.35.
Market analysts noted that the rupee's fall was somewhat cushioned by a drop in global crude oil prices and a weaker US dollar. Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, stated that while the rupee traded weakly, it recovered from its lowest points due to these factors. He predicted that the rupee would likely remain under pressure due to the US-Iran deal uncertainty and elevated dollar and US treasury yields. However, softer crude oil prices and reduced chances of a Federal Reserve rate hike in October could provide some support.
The Reserve Bank of India's Monetary Policy Committee is expected to announce a 25 basis point rate hike on Wednesday, aligning with broader central bank policies aimed at managing inflation risks amid escalating conflict in West Asia. The last repo rate hike occurred in February 2023, when the rate was raised to 6.50 percent. The current policy repo rate stands at 5.25 percent.
Meanwhile, the dollar index, which measures the US dollar's strength against six major currencies, was trading at 102.03, down 0.13 percent. Brent crude, the global oil benchmark, was trading lower by 1.68 percent at USD 98.63 per barrel. On the domestic equity market, the Sensex surged 685.34 points to close at 73,067.81, while the Nifty rose 220.35 points to 22,776.10. Foreign Institutional Investors offloaded equities worth Rs 4,699.14 crore on Monday.