depreciated 41 paise to close at 94.56 (provisional) against the on Tuesday, as elevated crude oil prices and unabated foreign capital outflows amid rising geopolitical uncertainties dented investor sentiments.
Forex traders said the rupee has already weakened quite sharply, factoring in the likely widening of the Current Account Deficit (CAD) and volatile capital flows.
Moreover, persistent foreign fund outflows weighed on the rupee, as so far this year, FIIs have pulled out over $19 billion from Indian equities.
At the interbank foreign exchange market, the rupee opened at 94.35 against the US dollar, then lost ground and touched an intraday low of 94.58 against the US dollar, and finally settled for the day at 94.56 (provisional), registering a fall of 41 paise over its previous close.
On Monday, the rupee settled with gains of just one paisa to close at 94.15 against the US dollar.
“The primary pressure on the rupee stems from weak capital inflows. Net FDI inflows have been subdued, while FPI flows have been affected by elevated global uncertainty, relatively high equity valuations, and the absence of a strong AI investment narrative in India,” said Rajani Sinha, Chief Economist, CareEdge Ratings.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was up 0.24 per cent at 98.73.
, was trading higher by 2.62 per cent at $111.07 per barrel in futures trade.
“There is a lot of uncertainty around the West Asia conflict. Even if the conflict eases in the near term, we expect crude oil prices to average around $85–90 per barrel in FY27. Under this baseline, the rupee is likely to remain in the 92–93 range on average in FY27,” Sinha added.
On the domestic equity market front, dropped 416.72 points to settle at 76,886.91, while the declined 97 points to 23,995.70.
Foreign Institutional Investors offloaded equities worth ₹1,151.48 crore on Monday, according to exchange data.
“The rupee appears somewhat undervalued based on interest rate differentials and REER indicators. However, in a downside scenario where the conflict escalates and crude oil prices rise further, there would be further weakening pressure on the rupee,” Sinha said.