The Indian rupee could not retain the initial uptrend to close 4 paise down at 86.16 (provisional) against the US dollar on Friday, as inflationary global crude oil prices, foreign fund outflows, and meltdown in domestic equities held the market sentiment.
The interbank foreign exchange market started the day on a stronger note with the rupee opening up 85.99 and traded in a narrow range between 85.97 and 86.23. It closed later at 86.16 representing a 4-paise drop against its past closing share of 86.12. This fall followed a decline of 20 paise on Thursday as the trend continued.
Negative domestic and international triggers were cited by the forex traders as a reason behind the weakness of the rupee. The foreign institutional Investors (FIIs) continued to be net sellers in the equity market and sold 3,694.31 crores of equities on Thursday, as per the data provided by the stock exchanges. In the meantime, there is also the bearish sentiment in the domestic equity markets, and the Sensex fell by 501.51 points and closed at 81,757.73, and the Nifty showed a negative mood by posting a loss of 143.05 points and ended at 24,968.40.
To add insult to the injury, international oil prices soared with Brent crude futures adding 1.17 percent to trade at USD 70.33 a barrel. The elevated oil prices usually damage India’s import bill and expand the trade deficit, and affect the rupee.
The fall of the rupee was, however, evaded to a larger extent due to the devaluation of the US dollar in the international market. The dollar index, which is the currency that is opposite to the greenback, using a basket of the six main currencies, dropped by 0.36% to 98.38, giving the local currency some aid.
In the meantime, the Ministry of External Affairs observed that India and the US have been negotiating to eliminate pending issues that could be used to grant a bilateral trade deal, a good development after the US President Trump had indicated that the establishment of a trade deal is imminent.
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