On Monday, the Indian Rupee lost its initial gains to end the day lower against the US dollar as the dollar index and crude oil prices went down. Other Asian currencies were in the green, and this boosted the domestic currency, which started strongly at 87.20 per dollar, 34 paise better. But it turned around to close 12 paise down at 87.66 against the dollar in the day, market reports said.
This surge is amidst the heightened market expectations since the Reserve Bank of India is meeting on the Monetary Policy Committee (MPC) on August 4 to determine the most important interest rates. Market watchers and investors are following the words of RBI Governor Sanjay Malhotra for any signs of the stance of the central bank in the volatile economic situation that prevails nowadays.
The rupee has come under sharp pressure over the last weeks. It lost 2.14 per cent in July alone, and this is its highest monthly result since September 2023. It also registered its biggest weakening against the dollar in weekly terms since December last year, with a 1.2 per cent decline. Outflow of foreign capital has been one of the key factors that have led to the weakness of the rupee, affecting the general market sentiment.
In geopolitical terms, the Indian Prime Minister, Narendra Modi, reacted to the US President, Donald Trump and imposed a 25 per cent tariff on the US, advising the Indian citizens to buy locally produced goods in support of the Indian economy. India has also preserved its close relations with Russia as there was a broad consensus on not taking retaliatory actions instead of relying on diplomatic leadership moves.
In the meantime, the US dollar index, which monitors the power of the greenback versus the six major currencies, declined by 0.3 per cent to 98.84. Due to the OPEC+ statement about the increase in production in September and intentions to add 547,000 barrels per day, the prices of crude oil dropped.
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