The rupee opened weaker on Monday, losing 16 paise against the US dollar. It started at 90.07 and quickly fell to 90.11 in early trade. This decline follows a period of pressure from high crude oil prices and ongoing foreign fund outflows.
Forex traders pointed to strong dollar demand as a key factor. Corporates, importers, and foreign portfolio investors were all seeking the greenback. This consistent demand created significant pressure on the Indian currency.
On Friday, the rupee had settled at 89.95. That closing came after the Reserve Bank of India announced a key policy rate cut. It was the first such move by the central bank in six months.
Now, investor attention is shifting. The focus is squarely on the upcoming Federal Reserve policy meeting. Markets are anticipating a rate cut from the US central bank next week.
The probability is placed near 90 percent.
Simultaneously, important trade talks are beginning. India and the United States will start three-day negotiations on a bilateral trade agreement. These discussions commence on December 10.
Anil Kumar Bhansali of Finrex Treasury Advisors highlighted the busy diplomatic schedule. He noted that a US team and an EU team will both be in India for trade talks. The market awaits positive outcomes from these negotiations.
Bhansali also commented on foreign portfolio investor activity. FPIs continue to be sellers in the market. This is happening even as Indian equities show upward movement.
He mentioned a lack of strong directional cues. The dollar index and Asian currencies are currently trading in a range. This creates an environment of uncertainty.
Looking at key benchmarks, the dollar index was slightly lower. It fell 0.11 percent to 98.88. Meanwhile, Brent crude futures saw a small increase. Oil prices rose by 0.17 percent to $63.85 per barrel.
The domestic equity markets also faced pressure. The benchmark Sensex declined over 215 points in early trade. The Nifty index was down nearly 65 points.
This stock market weakness added to the rupee’s woes.
Data from the previous session showed continued foreign institutional investor selling. FIIs offloaded equities worth Rs 438.90 crore on Friday. This persistent outflow is a headwind for the currency.
The combination of factors creates a complex picture. Oil prices, foreign fund flows, and global central bank policies are all in play. Traders are navigating this multifaceted landscape.
All eyes will remain on the Federal Reserve’s decision. Its policy outcome could set the tone for global currency markets. The rupee’s trajectory will depend heavily on these external developments.