Rupee Declines at Open: INR Falls to 85.5175 vs Dollar Due to Market Volatility

The Indian rupee slid 0.3% to 85.5175 per U.S. dollar at the open on Thursday, down from its last close of 85.27, due to the renewed volatility in currency markets. The decline follows a short stint of firmness, with dealers responding to changing global cues and domestic market forces.

 

Weaker Opening:

The rupee fall at the open comes after an earlier rally in which it had appreciated on account of aggressive sell-off of the dollar by foreign banks and importers. The rupee on Wednesday had settled 16 paise higher at 85.26, lifted by a weak U.S. dollar and positive close in domestic equities.

 

Market Drivers

The rupee's recent fall is being credited to new dollar demand by foreign and state-run banks, probably due to one-off outflows and portfolio rebalancing. Even though the weaker beginning, currency dealers observe that such outflows are not likely to be sustained, with the rupee's overall outlook being firm on account of a broadly weakening U.S. dollar.

 

Global Cues:

The U.S. dollar's recent fall was prompted by lower-than-anticipated U.S. inflation data, feeding hopes of imminent Federal Reserve rate cuts. This has helped support some emerging market currencies, such as the rupee, although local factors remain responsible for short-term movements.

 

Forecast and Sentiment:

Experts foresee the rupee moving in a tight band in the short term, and its path would be determined by global macro themes and local liquidity conditions. Trading Economics forecasts the rupee to fluctuate at around 85.66 by the quarter-end, with a steady trend of rupee depreciation over a year.

 

Sources: Reuters, United News of India, Trading Economics