Rupee falls 1 paisa to close at 83.96 against US dollar

The Indian rupee fluctuated within a narrow range and ended the day slightly lower at 83.96 (provisional) against the US dollar on Thursday, after the Reserve Bank of India (RBI) maintained the benchmark interest rate and stance unchanged for the ninth consecutive policy meeting. Forex traders attributed the rupee’s decline to weak domestic markets, rising crude oil prices, and outflows of foreign funds. However, the rupee was prevented from depreciating significantly due to a decrease in the US Dollar index. At the interbank foreign exchange market, the rupee opened at 83.94, reaching an intraday low of 83.97 and a high of 83.93 against the dollar during the session.

It finally settled at 83.96 (provisional), down 1 paisa from its previous close. The previous day, the rupee had traded within a narrow range and closed lower by 3 paise at 83.95 against the US dollar. It had also hit an all-time low of 84.09 against the US dollar earlier in the week. According to Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, the rupee is expected to trade with a negative bias due to selling pressure from foreign investors and weak domestic markets.

Geopolitical tensions in the Middle East may also influence the rupee’s performance. Nevertheless, a weak US dollar and potential RBI intervention could provide support. Furthermore, the dollar index, which measures the strength of the US dollar against a basket of six currencies, decreased by 0.12 per cent to 103.07 points. Meanwhile, Brent crude, the global oil benchmark, traded 0.78 per cent lower at USD 77.72 per barrel in futures trade.

In the bi-monthly monetary policy review, RBI Governor Shaktikanta Das announced that the Monetary Policy Committee (MPC) decided to maintain the benchmark repurchase or repo rate at 6.50 per cent and retain a policy stance at “withdrawal of accommodation” to align with the MPC’s focus on bringing inflation towards its 4 per cent target. The decision by the RBI contrasts with recent actions taken by central banks in other developed economies.

While the Bank of England reduced interest rates, the Bank of Japan increased rates to their highest levels since 2008. Additionally, concerns about a US recession have mounted following weak employment numbers, increasing pressure on the Federal Reserve to cut rates in order to support the economy.

In the domestic equity market, the 30-share BSE Sensex fell 581.79 points, approximately 0.73 per cent, to close at 78,886.22 points, while the Nifty declined 180.50 points, around 0.74 per cent, to 24,117.00 points. Foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 3,314.76 crore, as indicated by exchange data.