Indian rupee ended the trading day on Wednesday slightly better, closing at 88.69 to the U.S dollar, which is six paise higher than the last close. During the final quarter-hour, the currency shot up eight paise, providing the slide of the year to date with a slight 3.60 per cent drop. This was lifted in the context of a broader backdrop of diminished trust in the currency, which was caused by new doubts over the foreign outflow of capital and a strong shock to the U.S.-based outsourcing industry.
The rupee had sunk to an all-time low of 88.79 a day before, as foreign money panicked off Indian holdings. In the previous session, foreign portfolio investors (FPIs) sold equities to the tune of ₹3,551.19 crore, which is an indication that risk appetite is pulling back. At the same time, an executive order by President Trump to increase the H-1B visa application fee to $100,000, as opposed to the earlier fee of 2000-5000, established a one-time-only payment based on the September 21 date. The white house made it clear that the fee would be in the form of one fee, but analysts have cautioned that it may tighten the margin of the Indian software and services companies that depend so much on Indian talent to undertake projects in the U.S.
The HSBC Flash India Composite Output Index in the corporate sector declined by 63.2 in August to 61.9 in September. The fall portrays a relatively sluggish performance reduction in the aggregate manufacturing and service industries in India, but the index remains a strong growth rate as compared to international standards.
In the meantime, the dollar index increased by 0.34 per cent to 97.59 in a move that showed a reversal of the U.S. labour market and inflation prospects following warnings of threats by the Fed Chairman Jerome Powell. The greater greenback assisted in propelling the modest gains gained by the rupee, whereas the general trend of the currency is still unstable.
There was a weak movement in commodity markets. The Brent rose 0.58 percent to $68.02 a barrel and WTI increased 0.57 percent to $63.77, supported by the declining U.S. crude inventories and a reduction in Kurdish oil exports. The low increase in oil prices offered a slight cushion to the fuel-intensive industries in India, but the effect on the rupee was weakened.
Altogether, the fact that the rupee slightly recovered highlights the fragility of the balance between the domestic economy and the external factors, especially the attitude of foreign investors and the international policy shocks. The Fed, Indian monetary policy, and the changing U.S. visa environment will now be looked upon by the investors to give another indication of the direction the currency will take.
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