Rupee Falls as Foreign Capital Outflows and US-Iran Deal Uncertainty Weigh

The Indian rupee weakened by 8 paise on Tuesday, closing at ₹96.43 against the US dollar. This decline came amid ongoing foreign capital outflows and concerns over a potential US-Iran deal. The rupee’s fall was somewhat limited by lower global crude oil prices and a weaker US dollar.

During the day, the rupee opened at 96.29 and fluctuated between 96.29 and 96.45 before settling at 96.43. On Monday, it had dropped 10 paise to close at 96.35. Anuj Choudhary, a Research Analyst at Mirae Asset Sharekhan, noted that the rupee recovered from its lows due to a sharp drop in crude oil prices and a softer US dollar and treasury yields.

Choudhary expects the rupee to remain under pressure due to uncertainty over the US-Iran deal and elevated dollar and treasury yields. However, he believes softer crude oil prices and reduced chances of a Fed rate hike in October could provide some support. He projects the USD-INR spot price to trade within a range of ₹96.15 to ₹96.60.

The Reserve Bank of India’s Monetary Policy Committee began a three-day meeting on Monday and is expected to announce a 25 basis point rate hike on Wednesday. The last rate hike was in February 2023, when the repo rate was raised to 6.50%. The current repo rate stands at 5.25%. Meanwhile, the dollar index was trading at 102.03, down 0.13%, and Brent crude fell 1.68% to $98.63 per barrel.

On the domestic equity market, the Sensex surged 685.34 points to 73,067.81, while the Nifty rose 220.35 points to 22,776.10. Foreign Institutional Investors sold equities worth ₹4,699.14 crore on Monday.