Business APAC
19th June 2024
Rupee Gets Hammered
The Indian Rupee took a beating for the third straight day, falling a sharp 30 paise to close at 86.73 against the US dollar on Thursday. A potent mix of a muscular US dollar, rising oil costs, and investors getting cold feet on the domestic market pushed the currency to its weak finish; a key reason the Indian rupee falls.
The local unit started the day at 86.54 but couldn’t hold its ground. It was a volatile session, with the currency touching a low of 86.89 as dollar demand surged. The close at 86.73 marks a significant retreat from Wednesday’s 86.43 level, and it’s clear the Indian rupee falls further.
Why the Dollar is King ?
The main culprit behind the Rupee’s slide is the sheer dominance of the US dollar right now. The US Dollar Index (DXY), which pits the greenback against other world currencies, is trading strong near the 98.90 mark.
Traders are flocking to the dollar as a safe bet amid simmering geopolitical tensions and uncertainty over global growth, leaving currencies like the Rupee out in the cold. While the US Fed kept interest rates on hold this week, its commentary has done little to weaken the dollar’s appeal, hence the Indian rupee falls.
Double Trouble: Oil and Outflows
Pouring salt on the wound are crude oil prices, which have been stubbornly high. Brent crude, the global benchmark, is hovering around $76 a barrel. For a country like India that imports over 85% of its oil, a higher price means paying more dollars, which directly batters the Rupee. This pressure ensures the Indian rupee falls.
Adding to the pressure, foreign institutional investors (FIIs) have been in a selling mood.
While there have been sporadic buying sessions, the trend for June has seen more money leaving Indian shores than entering. This exit of foreign capital adds to the demand for dollars, creating a perfect storm for the falling Rupee. When FIIs sell, the Indian rupee falls. This has become a consistent trend.
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