Indian Rupee Opens Flat at 85.65/$ as Weak Dollar Limits Depreciation
- The Indian Rupee opened flat at 85.65 per dollar on Wednesday, down 1 paise from Tuesday’s close of 85.64, as per Bloomberg data.
- The currency has declined over 1.3% so far in May.
- Tuesday’s fall was driven by dollar buying from oil companies and equity selloff by foreign portfolio investors (FPIs).
The Indian Rupee opened flat at 85.65 against the US Dollar, barely down by 1 paise from Tuesday’s close of 85.64, as weakness in the dollar index offset broader concerns weighing on the local currency. According to Bloomberg data, the rupee has already depreciated by more than 1.3 per cent so far this month.
Tuesday’s decline was attributed to dollar purchases by oil companies and a significant selloff in Indian equities by foreign portfolio investors (FPIs). Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted that FPIs sold over Rs 10,000 crore in the cash market, marking the largest outflow in more than three months.
Despite this pressure, the rupee’s losses were capped by a softer US Dollar Index, which slipped 0.44 per cent to 99.67, trading below the 100 mark. The index, which gauges the dollar’s performance against a basket of six major currencies, fell after US Federal Reserve officials issued cautious remarks on the economic outlook. St. Louis Fed President Alberto Musalem flagged concerns over a potentially weakening labour market and rising prices, sentiments echoed by Atlanta Fed President Raphael Bostic. Meanwhile, the 10-year US Treasury yield climbed back to 4.50 per cent, with short-term yields remaining stable.
Also Read More: How Foreign Banks' Dollar Sales Are Strengthening the Rupee
The dollar's decline helped support other Asian currencies, which posted gains between 0.1 per cent and 0.4 per cent, giving the rupee a buffer against sharper losses.
However, global geopolitical tensions and rising crude oil prices added downside pressure. Reports of Israel preparing for a potential strike on Iranian nuclear sites triggered a reaction in oil markets. Brent crude prices rose by 1.48 percent to $66.35 per barrel, while WTI crude slipped marginally by 0.21 percent to $62.56 as of 9:15 AM IST.
According to Amit Pabari, Managing Director at CR Forex Advisors, firming crude prices due to geopolitical developments could keep the rupee under pressure. He added that technically, the dollar-rupee pair is likely to encounter resistance around the 85.60–85.80 range, while 85.20 will serve as a key support level.
Overall, the rupee’s near-term movement will hinge on further developments in crude prices, global risk sentiment, and dollar trends.
