The Indian rupee weakened by 20 paise to close at 95.38 against the U.S. dollar on Monday, as a stronger American currency put pressure on emerging market currencies despite supportive domestic factors.
In the interbank foreign exchange market, the rupee opened at 95.25 and traded between 95.22 and 95.48 during the day before settling at 95.38 (provisional). The decline came after the domestic currency had gained 17 paise to close at 95.18 on the previous trading session.
Market analysts attributed the rupee’s weakness primarily to renewed strength in the U.S. dollar. According to Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, investors continue to factor in the possibility of another U.S. interest rate hike this year, boosting demand for the greenback. However, positive sentiment in Indian equity markets and lower crude oil prices helped limit the rupee’s losses.
Choudhary also noted that importer demand for dollars could restrict any significant appreciation in the rupee. He expects the USD-INR spot rate to trade in the range of 95.10 to 95.60, with investors closely watching upcoming U.S. ISM Services PMI data for further direction.
Meanwhile, the dollar index, which measures the U.S. currency against a basket of six major currencies, rose 0.26% to 101.12. Brent crude futures, the global oil benchmark, slipped 0.76% to $71.57 per barrel, offering some relief to oil-importing countries like India.
On the domestic equity front, benchmark indices posted strong gains, with the Sensex rising 521.16 points to close at 78,285.07 and the Nifty advancing 159.50 points to 24,430.35. Foreign institutional investors also remained net buyers, purchasing Indian equities worth ₹1,355.33 crore.
India’s foreign exchange reserves, however, declined by $5.654 billion to $666.933 billion during the week ended June 26, according to the Reserve Bank of India, reflecting continued intervention to manage currency volatility.
