With the backdrop of increasing global economic pressures, the Indian Rupee weakened sharply on Monday, and dropped 39 paise to close at a record low of 95.23 (provisional) against the US Dollar. Recurrent geopolitical tensions in the Middle East have given rise to volatility in financial markets causing a rise in crude oil prices and raising the alarm of inflation and a potential economic slowdown.
The rupee opened at 94.95 against the dollar but found it difficult to overcome the selling pressure all through the day at the interbank foreign exchange market. It finally closed at 95.23, a huge drop considering that it had closed at 94.84. Players in the market cited a set of external and internal factors that were pressing on investor sentiment.
According to Forex traders, the price of Brent crude that is still hovering near USD 110 per barrel, is continuing to strain the economy of oil-importing countries such as India. High prices of oil boost the import bills and the current account deficit and further strain on the rupee. Moreover, the constant outflow of foreign capital in the world of uncertainty has also contributed to the weakened currency.
The dollar index, which is a measure of the strength of the greenback against a basket of the six major currencies, was trading slightly higher at 98.26, which is a sustained global demand of the US currency. Meanwhile, foreign institutional investors sold equities worth ₹8,047.86 crore during the previous session which added to the nervousness in the market.
The local equity markets were resilient despite the currency pressure, with the BSE Sensex climbing 355.90 points to close at 77,269.40, and the Nifty 50 soaring 121.75 points to close at 24,119.30.