The rupee rose 18 paise to 90.12 against the US dollar in early trade on Tuesday. This uptick was supported by a weaker greenback and lower global crude oil prices. Yet, several factors prevented sharper gains for the currency.
Forex traders pointed to US President Donald Trump’s remarks on tariffs targeting India. Foreign institutional investor outflows and weak domestic equity sentiment also played a role. These combined forces capped the rupee’s rally.
At the interbank foreign exchange, the rupee opened at 90.22 against the US dollar. It then climbed further to reach 90.12. This represented an 18 paise increase from its previous close.
Just a day earlier, the story was different. On Monday, the rupee weakened for the fourth consecutive session. It closed 10 paise lower at 90.30 against the dollar.
Geopolitical uncertainty had bolstered the dollar’s appeal. This kept pressure on the rupee through the start of the week. The currency’s path remains tied to global events.
Anil Kumar Bhansali of Finrex Treasury Advisors LLP provided insight. Trump threatened India with more tariffs if it did not align with US policy on Russian oil. These threats continue to hamper the rupee’s performance.
Bhansali suggested a good chance exists for the rupee to retreat to 91 levels. He cited the unlikely prospect of a near-term trade deal. The external environment remains challenging.
In a significant global development, the US carried out a military operation in Venezuela. The US deposed President Nicolas Maduro in this move. President Trump stated the US would run the South American country.
A key aim is to tap Venezuela’s vast oil reserves for sale to other nations. This action adds another layer to the complex global oil market. It influences currency dynamics worldwide.
Meanwhile, the dollar index traded 0.04 percent higher at 98.22. This index gauges the greenback’s strength against a basket of six currencies. Its movements are closely watched.
Bhansali noted the dollar index had fallen to 98.31 levels earlier. This followed weaker-than-expected US ISM Manufacturing PMI data. The figure came in at 47.9.
The data gave markets an indication of potential rate cuts. It signaled a weakening US economy. Such factors contribute to dollar volatility.
On the commodities front, Brent crude futures traded 0.31 percent lower. The global oil benchmark was at USD 61.57 per barrel. Lower oil prices often benefit oil-importing nations like India.
Domestic equity markets told a different story. The 30-share benchmark Sensex declined 431.95 points to 85,007.67 in early trade. The Nifty was also down 105.6 points to 26,144.70.
Sustained weak sentiments in these markets acted as a headwind. They limited the rupee’s gains despite supportive external factors. The local economic mood remains cautious.
Adding to the pressure, foreign institutional investors were net sellers. They offloaded equities worth Rs 36.25 crore on Monday, according to exchange data. This outflow of foreign capital weighs on the rupee.
The currency’s trajectory is a delicate balance. It responds to dollar strength, oil prices, and geopolitical statements. Domestic investor sentiment and equity flows also play a critical part.
Each trading session brings a new mix of these global and local influences. The rupee navigates this complex landscape daily. Its movements reflect the ongoing interplay of international finance and politics.