Indian currency weakens for third straight session as strong US dollar and foreign fund outflows weigh on sentiment
Mumbai ( Economy India): The Indian rupee extended its downward trend for the third consecutive session on Monday, slipping 7 paise to close at 88.77 against the US dollar, just shy of its record low level. The decline came as the US dollar strengthened globally and foreign investors continued pulling out funds from Indian markets.
Forex traders said that despite a positive opening in domestic equities, the rupee faced sustained pressure throughout the day due to firm demand for the greenback and rising US bond yields.
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Dollar Strength and Global Cues Pressure the Rupee
The US dollar index, which tracks the greenback against six major global currencies, hovered above 106.2, supported by upbeat US economic data and expectations that the Federal Reserve may keep interest rates elevated for a longer period.
This global strength of the dollar has prompted investors to shift towards safe-haven assets, leading to depreciation in emerging market currencies, including the rupee.
“The rupee’s weakness is part of a broader emerging market trend. The dollar’s strength and ongoing FII selling are keeping the domestic currency under stress,” said a senior forex trader at a state-owned bank.
FII Outflows and Oil Volatility Add Pressure
Foreign Institutional Investors (FIIs) were net sellers in Indian equities, withdrawing capital from both primary and secondary markets over the past week. This persistent foreign capital outflow has added pressure on the currency.
Meanwhile, crude oil prices remained volatile, with Brent crude hovering around $88 per barrel, fuelling concerns about India’s import bill and widening trade deficit. A higher oil import cost typically worsens the current account balance and weakens the rupee further.
Domestic Markets Provide Partial Support
On the domestic front, both the BSE Sensex and NSE Nifty managed to end the session with modest gains, offering some cushion to the rupee. Buying in banking, auto, and IT stocks helped offset global pressures to an extent.
Traders said the Reserve Bank of India (RBI) likely intervened intermittently in the forex market to contain excessive volatility and prevent sharp depreciation.
“RBI’s presence is visible in the spot market, ensuring the rupee doesn’t breach new psychological lows,” said an analyst with a private currency brokerage.
Rupee Slips 7 Paise to Close at 88.77 Against Dollar, Near Lifetime Low
Rupee Movement Snapshot
Parameter
Value
Previous Close
₹88.70 per US dollar
Closing Level
₹88.77 per US dollar
Intra-day Range
₹88.66 – ₹88.79
Trend
Third consecutive day of decline
Cautious Sentiment Ahead
Analysts expect the rupee to remain under pressure in the near term as global risk sentiment remains fragile. However, India’s robust foreign exchange reserves (around $650 billion) and steady macro fundamentals could limit sharp depreciation.
“The rupee may test the 89-per-dollar mark if the dollar index continues to rise, but RBI’s timely intervention and healthy reserves should prevent a free fall,” said Rajesh Mehta, Senior Economist at LKP Securities.
They added that easing crude prices or a softening in US bond yields could provide temporary relief to the domestic currency in the coming weeks.
Key Highlights
Rupee closes at ₹88.77 per US dollar, down 7 paise
Trades near all-time low levels
Third straight day of depreciation
Strong US dollar, FII outflows, and high oil prices weigh on sentiment
RBI expected to curb volatility if pressure intensifies
The rupee’s slide reflects the impact of strong global headwinds and capital flow pressures. As global investors brace for continued dollar strength and elevated US interest rates, the focus will remain on the RBI’s interventions and India’s ability to maintain macroeconomic stability amid challenging external conditions.
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