The Indian Rupee experienced a significant drop of around 46 paise on Monday, marking the largest single-day decline in a fortnight. This decline was attributed to ongoing Dollar outflows from the Indian equity markets by Foreign Portfolio Investors (FPIs), uncertainty surrounding the global impact of US import tariffs, and weakness in the Chinese Yuan.
Additionally, the upcoming maturity of non-deliverable forward (NDF) positions further fueled demand for the US Dollar, putting pressure on the Rupee’s value.
Closing at 87.33 against the Dollar, the Rupee weakened despite the Dollar itself facing downward pressure against currencies like the Japanese Yen and Swiss Franc. The concerns surrounding a potential slowdown in the US economy due to President Trump’s import tariffs on nations such as Canada, Mexico, and China also contributed to the Rupee’s decline.
Arvind Kanagasabai, Executive Vice President at Tamilnad Mercantile Bank, highlighted the various factors weighing on the Rupee, including sluggish export growth, rising imports, and looming US tariffs. He emphasized that external factors influencing the Rupee-Dollar exchange rate cannot be controlled by the central bank, necessitating periodic interventions to manage volatility.
Rahul Kalantri, Vice President (Commodities) at Mehta Equities, noted that despite the Dollar index and crude oil prices hitting multi-month lows, the Rupee depreciated due to investor uncertainty and increased demand for the Dollar as a safe-haven asset. Ongoing trade negotiations between India and the US added to market volatility, with focus shifting to upcoming consumer inflation data releases from both countries.
Looking ahead, Kalantri anticipates continued Rupee volatility amid fluctuations in the global financial markets and the Dollar index. He expects the Rupee to trade within the range of 86.90-87.70 in the coming days.
