According to market data, the rupee opened at 95.54 per dollar compared with Tuesday’s (June 9’s) closing level of 95.35, marking a decline of 19 paise at the start of trade.
The domestic currency has struggled to build on the gains seen last week after the Reserve Bank of India’s measures aimed at attracting foreign inflows. Market participants said the initial boost has faded amid steady dollar buying by importers and sustained selling by foreign investors in Indian equities.
Bankers noted that the rupee is currently only around 0.2% stronger than its level before the RBI announced the measures, suggesting limited follow-through support from the central bank’s steps.
Foreign portfolio investors have sold more than $6 billion worth of Indian equities so far this month, exceeding the total outflows recorded in the previous month. The resulting demand for dollars has remained a key headwind for the rupee.
Traders said the RBI’s recent measures have helped shift expectations for the USD/INR trading range lower, with some market participants seeing scope for the pair to move towards the 93-94 zone over time. However, elevated crude oil prices, importer hedging requirements, and continued equity outflows are expected to keep pressure on the domestic currency.
Global cues also remained unsupportive. Most Asian currencies weakened while regional equity markets and US stock futures traded lower. Oil prices advanced amid renewed geopolitical concerns in the Middle East, reducing investor appetite for risk assets and supporting the dollar.
Investors are also awaiting US inflation data due later in the day for clues on the Federal Reserve’s policy path. Markets have priced in the possibility of a rate hike later this year, a sharp shift from earlier expectations of rate cuts, which has further supported the greenback against emerging market currencies.
–With Reuters inputs
