Rupee Depreciates by 4 Paise Against the Dollar To Close at Rs 86.16, Today

Mumbai, July 18: The Indian rupee concluded the trading day 4 paise lower at 86.16 (provisional) against the US dollar on Friday. This depreciation followed early gains, with the currency succumbing to a combination of foreign fund outflows, rising global crude oil prices, and  sell-off in the domestic equity markets.

Intraday Movement and Exchange Rate Trends

At the interbank foreign exchange market, the rupee opened strongly at 85.99 but was unable to sustain this momentum. Throughout the trading session, the currency fluctuated between an intraday high of 85.97 and a low of 86.23 before settling at its provisional close of 86.16. This was marginally lower than Thursday’s closing rate of 86.12.

Despite the prevailing pressures, the rupee’s decline was somewhat contained by a weaker US dollar, which saw a softening against other major global currencies. The dollar index, a measure of the dollar’s value against a basket of six major currencies, dropped by 0.36% to 98.38. This provided a degree of temporary support to the Indian currency.

External Pressures: Crude Oil and Equity Sell-off

The rise in crude oil prices exerted additional strain on the rupee. Brent crude surged by 1.17% to USD 70.33 per barrel in futures trade. As India is a major importer of crude oil, rising global energy costs typically inflate the country’s import bill and can lead to a widening of the current account deficit, thereby putting depreciating pressure on the rupee.

Concurrently, domestic equity markets witnessed a sharp decline, further dampening investor sentiment and contributing to the rupee’s weakness. The BSE Sensex plunged 501.51 points to close at 81,757.73, while the NSE Nifty lost 143.05 points to end the day at 24,968.40.

FII Outflows and RBI Intervention

Foreign institutional investors (FIIs) were significant net sellers in the equity market, having offloaded shares worth ₹3,694.31 crore on Thursday. Such capital outflows directly reduce the demand for the rupee, putting downward pressure on its exchange rate.

Market participants noted active dollar buying, which pushed the rupee lower, until the Reserve Bank of India (RBI) reportedly intervened to moderate the pace of depreciation. The RBI often intervenes in the foreign exchange market by buying or selling foreign currency (typically the US dollar) to stabilise the rupee, manage volatility, and maintain orderly market conditions. This action helps to curb excessive depreciation or appreciation, thereby safeguarding India’s economic stability.

Ongoing Trade Negotiations with the US

Traders are also closely monitoring the outcome of ongoing India-US trade negotiations. The Ministry of External Affairs confirmed on Thursday that discussions are in progress to resolve outstanding issues. This follows US President Donald Trump’s recent remark that a trade deal with India is “very close,” which could bring a degree of certainty to bilateral trade relations.

Looking Ahead

Looking ahead, market participants anticipate the rupee to trade within the range of 85.90 to 86.40 on Monday. If the trade negotiations remain unresolved or face setbacks, traders suggest the rupee could potentially weaken further towards the 87 mark.

The rupee’s trajectory in the coming sessions will largely depend on the direction of FII flows, global crude oil price movements, any further interventions by the RBI, and the progress made in the bilateral trade discussions between India and the US.

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations