Early gains faded, and the Indian rupee fell 15 paise in the last session of Monday to end at 86.67 (provisional) against the US dollar, under pressure of month-end dollar demand by exporters, and an apprehensive mood. Forex traders blamed the slumps on increased demand for the greenback and the fearful nature of investors before some very important events in their country and in the world at large.
At the interbank foreign exchange market, the rupee opened at 86.47 per dollar and it reached the intra-day high of 86.40 before it dipped to its lowest level of 86.67 in a single day. Traders reported that they were cautious before the results of India-US trade discussions that should be held before the August 1 deadline, which would affect the bilateral trade volumes and currency directions.
Extrapolations around the world were also a drag on sentiment. The dollar index, which compares the US currency with a basket of six major currencies, rose 0.54 percent to 98.17, weighing on the value of emerging market currencies. Upon striking a trade deal with the European Union, the United States increased the price of Brent crude oil futures by 0.85 percent to 69.02 per barrel due to decreased fears of tariffs and soaring expectations of a robust future energy demand.
The poor performance in the equity markets also contributed to the plight of the rupee on the domestic front. The 30-share benchmark BSE Sensex declined 572.07 or 0.70 percent to finish at 80,891.02 as the broader NSE Nifty fell by 156.10 or 0.63 percent to close at 24,680.90. Foreign institutional investors or FIIs dumped (net basis) stocks worth 1979.96 crores on Friday, which also acted as a burden to the market.
It will be next week when both the decision on monetary policy by the US Federal Reserve as well as the Bank of Japan is expected to be made, and that is likely to lead the way in the global currency markets as well as global capital flows in the days to come.
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