The rupee on Monday closed at a report low of 85.8275 per US greenback within the backdrop of the latter gaining power and FPI associated outflows from the Indian fairness market.
Opening at 85.7950 per greenback, the rupee ended the day about 6 paise weaker vis-a-vis the earlier shut of 85.77. Intraday, it examined a low of 85.84.
The 30-share bellwether BSE Sensex declined 1.59 per cent (or down 1,258.12 factors) at 77,964.99 because the HMPV virus forged its shadow on market sentiment. The 50-share Nifty fell 1.62 per cent (or down 388.70 factors) to shut at 23,616.05.
Greenback demand
Foreign exchange sellers mentioned there was persistent demand for {dollars} from custodial banks on behalf of their FPI shoppers. The RBI is believed to have intervened available in the market to curb volatility within the motion of rupee-dollar.
“With Donald Trump set to take cost as US President later this month and the US economic system appears poised to develop robustly, the US greenback might proceed to achieve power and speed up INR’s depreciation within the March 2025 (fourth) quarter than only a 1.4 per cent depreciation witnessed in 9MFY25,” mentioned Incred Analysis Providers, in a be aware.
Financial institution of Baroda economists cautioned that the rupee depreciation can result in imported inflation which might present itself into greater core inflation.
With the Chinese language yuan depreciating towards greenback, the rupee is coming beneath stress.
Deutsche Financial institution India, in a report, noticed that rupee is prone to depreciate with or with out fee cuts.
“Now we have a forecast of rupee depreciating to 87 by end-March 2026, which will be seen earlier as effectively, if the tariff battle escalates greater than what we’ve factored in at this stage and the RBI relaxes its FX intervention technique.
“The RBI not reducing charges won’t forestall rupee depreciation, however it can harm the expansion prospects for 2025 and past, in our view. Due to this fact, the rate of interest coverage shouldn’t be linked to the FX coverage, in our view,” mentioned the financial institution’s economists.
The economists anticipate rupee to replicate extra two-way motion in 2025, in comparison with the previous few years.
“Whereas the present account deficit of under 1.5 per cent of GDP shouldn’t be troublesome to finance, however the inter-temporal volatility of capital flows is prone to exert stress on the rupee (as is the case presently), so long as the broad Greenback index continues to strengthen,” they mentioned.
