Forex Update: The Indian rupee lost 18 paise on Monday, closing at 86.70 against the US dollar. It started the day stronger at 86.47 and briefly rose to 86.40 but later dropped due to strong demand for dollars from importers and cautious sentiment in the market. On Friday, the rupee had settled at 86.52.
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Forex Update – Impact of Global Trade and Dollar Strength
Experts say the rupee’s weakness follows a trend seen in many Asian currencies, mainly due to the US dollar gaining strength. The dollar’s rise was boosted by the recent trade agreement between the European Union and the United States. Additionally, uncertainty over India’s ongoing trade talks with the US ahead of the August 1 deadline added to the pressure on the rupee.
Market Analyst Views on Rupee Movement
Dilip Parmar, a research analyst at HDFC Securities, explained that the rupee’s decline reflects broader currency trends in Asia. He expects the rupee to find support near 86.10 and face resistance around 86.75 in the short term.
Global Market Indicators Show Volatility
The US dollar index rose 0.54% to 98.17, showing a stronger dollar overall. Brent crude oil prices also increased by 0.85%, reaching $69.02 per barrel, helped by optimism that the EU-US trade deal may support future energy demand.
Stock Markets React Negatively
India’s stock markets felt the pressure as well. The BSE Sensex fell by 572 points (0.70%) to 80,891, while the Nifty 50 index dropped by 156 points (0.63%) to 24,680. Foreign investors sold shares worth ₹6,082 crore, adding to market worries.
Investor Caution Ahead of Policy Decisions
Anuj Choudhary, research analyst at Mirae Asset Sharekhan, noted that the rupee is trading with a slight negative bias due to high dollar demand from importers and uncertainty ahead of monetary policy meetings of the US Federal Reserve and Bank of Japan. He expects the rupee to trade between 86.35 and 86.90 in the near term.
Domestic Economic Data Adds to Concerns
India’s industrial growth slowed to 1.5% in June, the lowest in 10 months, affected by weak mining and power production caused by heavy rains. This weak performance raised concerns among investors.
Foreign Exchange Reserves Decline
India’s forex reserves also dropped by $1.183 billion to $695.49 billion in the week ending July 18, down from the record high of $704.89 billion in September 2024. This decrease adds to worries about the country’s economic stability.
Summary
In summary, the rupee’s decline reflects a mix of global and domestic factors, including a stronger US dollar, trade uncertainties, cautious investors, weak industrial output, and declining forex reserves. Market watchers are closely monitoring upcoming trade deadlines and central bank decisions for further direction.
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