Rupee Falls By 9 Paise to 85.96 Against US Dollar Ahead of RBI Policy Decision

Mumbai | June 5 – The Indian rupee followed its weak run against the US dollar and opened lower on Thursday, slipping 9 paise to 85.96. One of the primary reasons for the rupee’s weakening is that the demand for dollars from foreign investors, oil companies, and importers continues to exert pressure on the domestic currency.

At the interbank foreign exchange market, the rupee opened at 85.86 and quickly declined to 85.96, compared to its previous close of 85.87. This marks the third straight session of depreciation.

With the continued weakening of the rupee against the dollar, all eyes are now on the Reserve Bank of India’s (RBI) monetary policy meeting, the outcome of which is expected on June 6. The central bank’s rate-setting panel commenced its three-day deliberations on Wednesday. Market experts and analysts expect the RBI to cut the repo rate by 25 or 50 basis points to ensure stabilisation in the falling rupee against the US dollar.

As a result, the sentiment in currency markets remained cautious. The dollar index, which measures the strength of the US dollar against six major currencies, rose 0.07% to 98.85 in early trading.

Meanwhile, crude oil prices, a key factor for the rupee as India is a net importer, showed volatility. Brent crude futures slipped 0.14 per cent to USD 64.77 per barrel, but later edged higher to USD 65.70 amid renewed Russia-Ukraine tensions, raising concerns for India’s import bill.

However, equities continued to show growth in the domestic markets. The BSE Sensex surged 417.96 points to 81,416.21, while the NSE Nifty rose 125.05 points to 24,745.25. Foreign Institutional Investors (FIIs) were net buyers, purchasing equities worth Rs 1,076.18 crore on Wednesday.

The near-term movement of the rupee is expected to remain sensitive to the RBI’s policy stance and further developments in crude oil prices. It remains to be seen what the RBI will decide for the repo rate on Friday and whether it will take a defensive stance of cutting the rate by 25 bps or an aggressive stance of a 50 bps rate cut.

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