The Indian Rupee has been continuously weakening in recent times, and this seems to be directly linked to foreign capital flows and the performance of domestic stock markets. In early trading on Tuesday, the rupee fell five paise to 89.73 against the US dollar, while it had opened at 89.67.
Why is the rupee weakening?
Experts of the foreign exchange market say that while the continuous selling by foreign institutional investors is putting pressure on the market, the sluggishness in the domestic stock markets is also hindering the strengthening of the rupee. However, weakness in the dollar index and fall in international crude oil prices have provided some support to the rupee at lower levels.
On Monday, the rupee failed to maintain its early gains and closed slightly lower at 89.68 against the dollar, as support from a rising equity market got weakened by a surge in crude oil prices. Meanwhile, the dollar index, which gauges the dollar’s position against six major currencies, fell 0.20 per cent to 98.08, but despite this, weakness in domestic markets weighed on the rupee.
What do experts say?
Talking about the stock market, in early trading the Sensex fell 116.57 points to 85,450.91 and the Nifty fell 27.15 points to 26,145.25. Brent crude was also down slightly, falling 0.12 percent to trade at $61.99 a barrel. Market data also showed that foreign institutional investors remained net sellers on Monday, selling shares worth Rs 457.34 crore, adding further pressure on the rupee.
Experts believe that a weak dollar and possible strength in domestic markets may give some relief to the rupee in the coming days, but the delay in India-US trade agreement and global uncertainties may keep the pressure on higher levels. According to analysts, the spot rate for the dollar-rupee pair is likely to remain in the range of 89.20 to 89.80 for now, and investors will keep a close eye on key global economic data, including US GDP data.
