The rupee tumbled 38 paise to settle at 87.33 against the US dollar on Monday, marking its steepest single-day decline in over a month. The domestic currency struggled despite a weaker dollar, as a sell-off in the equity market dampened investor sentiment. Forex traders noted that volatile crude oil prices and continued foreign fund outflows added pressure, leaving the rupee vulnerable to further depreciation.
At the interbank foreign exchange, the rupee opened on a weak note at 87.24 and quickly lost ground amid intense volatility. The currency touched an intraday low of 87.36 before recovering slightly to close at 87.33. It briefly attempted an upward move, reaching 87.16 at one point, but selling pressure ultimately weighed it down. The steep drop followed a relatively stable session on Friday, when the rupee had gained 17 paise to end at 86.95 against the dollar. The latest fall surpassed the rupee’s previous sharp drop of 39 paise recorded on February 5.
Despite the dollar index weakening by 0.15 percent to 103.65, the rupee found no relief as domestic factors overshadowed the global currency movement. Traders pointed to concerns over crude oil prices, which remained volatile amid tariff uncertainties worldwide. Brent crude, the international benchmark, rose 0.28 percent to trade at USD 70.56 per barrel in futures, signaling continued pressure on India’s import bill.
Domestic equity markets further contributed to the rupee’s decline. The 30-share BSE Sensex fell by 217.41 points, closing at 74,115.17, while the Nifty dropped 92.20 points to settle at 22,460.30. The market downturn reflected cautious investor sentiment, with participants reacting to macroeconomic uncertainties and global trade concerns. Analysts noted that the persistent sell-off in equities weakened confidence in the rupee, as foreign investors pulled funds from the market.
Foreign institutional investors continued to offload equities, adding to the rupee’s woes. Data from stock exchanges revealed that FIIs sold shares worth Rs 2,035.10 crore on a net basis on Friday, extending their selling streak. Market observers linked this capital outflow to concerns over India’s economic outlook and global risk aversion, which kept foreign investors wary.
The Reserve Bank of India’s latest forex reserve data also painted a concerning picture. The central bank reported a decline of USD 1.781 billion in the country’s foreign exchange reserves, which now stand at USD 638.698 billion as of February 28. This drop followed a significant jump of USD 4.758 billion in the previous reporting week, highlighting the volatility in India’s forex holdings. A lower reserve buffer adds to currency pressures, limiting the central bank’s ability to intervene aggressively in the forex market.
Traders and analysts foresee further rupee fluctuations in the coming days, as global market conditions remain unpredictable. The combination of crude oil price swings, ongoing trade tensions, and foreign fund outflows will likely dictate the rupee’s short-term trajectory. Some experts believe the central bank may step in to curb excessive volatility, but the broader trend will depend on global economic developments and investor sentiment.
Despite the sharp decline, some traders expressed hope that a stabilizing dollar index and a potential reversal in equity market sentiment could provide temporary relief. However, they warned that sustained foreign outflows and high oil prices might keep the rupee under pressure in the near term. The domestic currency now faces a critical test, with market participants closely watching external factors and policy moves that could influence its direction.
As the rupee navigates these challenges, investors remain on edge, assessing the impact of global economic shifts on India’s financial markets. The currency’s performance in the coming sessions will depend on whether the government and the central bank take measures to restore investor confidence and manage forex reserves effectively.
Market participants also highlighted concerns over India’s trade deficit, which has widened due to rising import costs and weakening exports. A depreciating rupee makes imports more expensive, putting additional strain on businesses dependent on foreign goods. With crude oil prices fluctuating, energy costs could further weigh on the economy, affecting inflation and corporate profitability. Exporters, on the other hand, may benefit from a weaker rupee, as it makes Indian goods more competitive globally. However, uncertainty in global trade continues to limit any significant advantage.
Investors are now closely monitoring the US Federal Reserve’s policy stance, as any signal of prolonged higher interest rates could push more funds out of emerging markets like India. The rupee’s movement will largely depend on how foreign investors react to global economic data, including inflation trends in the US and Europe. Any signs of further rate hikes could accelerate capital outflows, adding more pressure on the Indian currency.
Analysts also pointed to the role of domestic policy measures in stabilizing the rupee. The Reserve Bank of India may intervene if the currency sees excessive depreciation, using its forex reserves to manage volatility. Additionally, any government decisions regarding import duties or capital market regulations could influence investor sentiment. With inflation concerns persisting, authorities may also look at fiscal measures to balance growth and currency stability.
The rupee’s decline comes at a time when India is gearing up for its annual budget announcements and key economic decisions. Policymakers will need to address currency stability while ensuring that economic growth remains on track. As global uncertainty continues to shape market movements, the rupee’s trajectory in the coming weeks will be crucial in determining investor confidence and economic resilience.