On Monday, the Indian rupee depreciated by 38 paise against the US dollar provisionally to close at ₹88.24 against the dollar as the rising import bills put pressure on the currency amidst an otherwise softening dollar index and stable inflows of foreign funds in equities.
The domestic currency started the trading session slightly lower at 87.87 per dollar, and it was only one pais lower than its last trading point on Friday of 87.86. But as the day went by, the worry about a rise in the price of crude oil and unrelenting demand on the dollar by imports overruled the rupee. This caused the currency to hit a low of ₹88.31 in the intraday before it recovered marginally in the second half of the session. The fall in world prices of crude gave temporary relief, although it was not much to rescue the rupee, which was to finish at the end of trade weaker.
The dealers with the currency observed that the high demand for dollars by the importers, especially in the oil marketing enterprises, as well as the cautiousness before the release of major economic information, were causing the rupee to move down. They also specified that, though the global indicators were generally conducive to the situation, as the dollar index weakened and the inflow of foreign portfolio investors into the Indian stocks showed no significant fluctuations or changes, the domestic effect (import payments and inflationary pressures) overpowered the global indicators.
The rupee has also been losing its grip in other major currencies in the wider forex market. It fell 73 paise to close at 117.76 in British pounds (GBP) and fell 68 paise to 102.69 in the euro (EUR). Participants of the market believe that the rupee will be under light pressure in the short term because the changes in the oil prices and global risk appetite will be driving the currencies. Nonetheless, long-term inflows of foreign currency and decreasing yields of the US Treasury might provide some backing in the future.
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