Indian rupee edges lower against US Dollar amid market volatility

However, forex traders said a rally in equity markets and solid domestic macroeconomic data backed the Indian rupee and limited the fall.

Factors Influencing Rupee’s Performance

On Friday, the Indian rupee saw a slight decline, settling at 82.90 (provisional) against the US dollar. 

This dip was influenced by various factors, including the surge in crude oil prices in the global market and heightened demand for the American currency from importers. 

However, amidst this volatility, the rupee found support from a rally in equity markets and positive domestic macroeconomic indicators.

Activity in the Interbank Exchange Market

The local unit commenced trading at 82.86 against the greenback at the interbank foreign exchange market. 

Throughout the trading session, it maintained a narrow range of 82.84 to 82.91 before ultimately settling at 82.90 (provisional), reflecting a marginal decrease of 1 paisa from its previous close. Notably, the rupee had closed 2 paise higher at 82.89 against the US dollar on the preceding day.

Expert Insights and Market Outlook

Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, attributed the rise in the US dollar to month-end rebalancing by importers and oil marketing companies. 

Despite this, Choudhary expressed cautious optimism regarding the rupee’s performance, citing improved risk sentiments in domestic markets following robust GDP data and positive trends in equity markets. 

Also read: RBI data reveals growth in personal loans and credit trends

However, he cautioned that the rupee’s potential upside might be limited by a strong US dollar and elevated crude oil prices. 

Traders were advised to exercise caution ahead of key US economic data releases, including the ISM manufacturing PMI and construction spending figures.

Impact of Global Market Dynamics

Simultaneously, the dollar index, which gauges the greenback’s strength against a basket of six major currencies, experienced a marginal decline of 0.02 per cent to 104.07. Additionally, Brent crude futures, the global oil benchmark, surged by 1.26 per cent to USD 82.94 per barrel, further contributing to market volatility and influencing the rupee’s performance.