Rupee's Decline Amid Global Trade and Policy Uncertainties

The Indian rupee lost ground against the US dollar, closing 18 paise lower at 86.70, as market sentiment was weighed down by month-end dollar demand from importers and looming trade and monetary policy decisions.

Market Dynamics and Analyst Insights

Opening at 86.47, the rupee briefly touched an intra-day high of 86.40 before falling to a low of 86.70. Analysts attribute the rupee's weakness to a stronger dollar, fueled by the EU-US trade pact and uncertainties surrounding India's trade negotiations with the US.

Dilip Parmar, Research Analyst at HDFC Securities, noted, "The Indian rupee's depreciation mirrors the trend of most Asian currencies, driven by the dollar's strength post the EU-US trade deal." He anticipates the USD-INR pair to find support at 86.10 with resistance at 86.75.

Global Indicators and Domestic Market Reactions

The dollar index rose by 0.54% to 98.17, and Brent crude prices increased by 0.85% to $69.02 per barrel, reflecting optimism over the EU-US deal's potential impact on energy demand.

Domestically, the BSE Sensex and Nifty experienced declines, with foreign investors net selling shares worth Rs 6,082.47 crore. Weak industrial output growth and a decrease in forex reserves further exacerbated market nervousness.

Looking Ahead

With the August 1 trade deal deadline approaching and upcoming monetary policy meetings of the US Federal Reserve and the Bank of Japan, the rupee faces continued pressure. Analysts advise monitoring the USD-INR spot price, expected to trade between Rs 86.35 and Rs 86.90.