Rupee's Decline Amidst Market Volatility

The rupee fell by 12 paise to close at 86.52 against the US dollar on Friday, influenced by a combination of weak domestic equities, rising global crude oil prices, and ongoing foreign fund outflows. Forex traders highlighted the impact of a sharper decline in equity benchmarks and a stronger dollar overseas on the local currency's performance.

Market Reactions and Analyst Insights

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, pointed out that the rupee's weakness was driven by soaring crude oil prices and domestic market vulnerabilities, which also accelerated FII withdrawals. The market remains on edge with the August 1 deadline for the US-India trade deal looming and escalating geopolitical tensions between Thailand and Cambodia.

Future Outlook and Key Indicators

Choudhary anticipates the rupee to exhibit a slight negative bias in the short term, fluctuating between 86.30 and 86.90 per dollar. Investors are closely monitoring US durable goods orders and forthcoming monetary policy announcements from the Federal Reserve and Bank of Japan for further cues.

Global Factors Influencing the Rupee

The dollar index witnessed a 0.33% increase to 97.44, buoyed by positive US employment data. Meanwhile, Brent crude futures advanced by 0.42% to $69.47 per barrel, reflecting optimism around global trade negotiations.

Trade Agreement Uncertainties and Equity Market Performance

Uncertainty surrounding the India-US trade agreement continues to cast a shadow over the forex market. A currency dealer warned that failure or delays in negotiations could exacerbate pressure on Indian exporters, further deteriorating the rupee's prospects. On the equities front, the Sensex and Nifty experienced significant drops, with foreign institutional investors selling shares worth Rs 1,979.96 crore on a net basis.

Reserve Bank of India's Latest Findings

The Reserve Bank of India reported a $1.183 billion decrease in India's foreign exchange reserves, bringing the total to $695.489 billion for the week ending July 18.