The Indian rupee experienced a decline of 4 paise against the US dollar on Monday, trading at 88.30. This depreciation is attributed to concerns over trade tariffs, foreign outflows, and expectations of a US rate cut. Despite this, the Reserve Bank of India’s (RBI) intervention helped to cap losses. The rupee’s value has been under pressure due to worries over US trade tariffs and persistent foreign portfolio outflows.
According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, the RBI’s intervention has been crucial in controlling volatility and preventing a quick depreciation. The RBI is believed to have sold around $5-6 billion to support the rupee. Bhansali noted that market attention is now focused on the Federal Reserve’s (Fed) decision on September 17, with expectations of a rate cut creating uncertainty around the dollar’s future strength.
The dollar index rose 0.07% to 97.61, while Brent crude was trading 0.58% higher at $67.38 per barrel. On the domestic equity market front, the Sensex was up 93.81 points to 81,998.51, and the Nifty rose 24.45 points to 25,138.45. Foreign Institutional Investors purchased equities worth Rs 129.58 crore on Friday.
The country’s forex reserves jumped $4.038 billion to $698.268 billion during the week ended September 5, driven by a significant increase in the value of gold reserves. US Commerce Secretary Howard Lutnick warned that India must bring down its tariffs or face a “tough time” doing business with the US. Lutnick stated that the relationship between the US and India is one-sided, with India selling to the US and taking advantage of the open US economy.
The RBI’s efforts to maintain market confidence and control volatility have been successful so far, but the ongoing trade tensions and expectations of a US rate cut continue to weigh on the rupee’s value. The upcoming Fed decision will likely have a significant impact on the currency market, and investors are eagerly awaiting the outcome. Overall, the Indian rupee’s depreciation is a result of a combination of factors, including trade tariffs, foreign outflows, and US rate cut expectations, but the RBI’s intervention has helped to mitigate the losses.