The Indian rupee weakened sharply on Thursday, tumbling 21 paise to open at 94.66 against the US dollar in the interbank foreign exchange market, before slipping further to 94.71, according to a report by Business Today. The currency had closed at 94.50 on Wednesday, when it had gained 10 paise. The decline was attributed to global dollar strength after the US Federal Reserve's hawkish policy stance.
Rupee Opens Lower on Fed Hawkish Signal
The rupee opened at 94.66, down 21 paise from its previous close of 94.50, and later touched 94.71 in early trade. The move came as the US dollar index surged to 100.23, its highest level in four months, after the Federal Reserve kept interest rates unchanged but signalled that at least one quarter-point rate increase could take place later this year, Business Today reported.
| Metric | Previous Close | Open | Low (Early Trade) |
|---|---|---|---|
| USD/INR | 94.50 | 94.66 | 94.71 |
| Dollar Index | – | – | 100.23 |
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said, "Asian currencies had also weakened considerably, taking the rupee lower this morning. Most asset classes had fallen against the dollar keeping it well bid while the asset class was well offered."
Equities and Commodities React
Domestic equity markets opened lower, with the Sensex falling 111.23 points to 77,044.39 and the Nifty slipping 26.85 points to 24,058.85 in early trade, Business Today reported.
Brent crude futures declined 1.68% to $78.21 per barrel, providing some relief for India's import bill. Meanwhile, foreign institutional investors (FIIs) remained net buyers, purchasing equities worth Rs 101.59 crore on Wednesday, according to exchange data cited by Business Today.
Geopolitical Developments Boost Sentiment
Market sentiment was supported by reports that the United States and Iran had electronically signed a memorandum of understanding (MOU) aimed at ending hostilities and establishing a framework for negotiations on Iran's nuclear programme, Business Today reported. Negotiators are expected to meet in Geneva on Friday.
"The agreement has improved market sentiment considerably, although President Trump simultaneously warned that military action could resume if Iran fails to comply with the framework," said Amit Pabari, Managing Director of CR Forex Advisors.
India-US Trade Talks Advance
Separately, Prime Minister Narendra Modi and US President Donald Trump directed officials from both countries to work towards concluding a balanced, mutually beneficial and commercially meaningful trade agreement at the earliest, Business Today reported. US Trade Representative Jamieson Greer is scheduled to visit India next week to advance discussions on the proposed trade agreement.
For treasury professionals and CFOs, the rupee's weakness increases the cost of import payments and raises hedging costs. The dollar index at 100.23 suggests sustained dollar demand, while the Fed's hawkish stance may keep emerging market currencies under pressure. The progress on India-US trade talks and the US-Iran MOU offer some positive signals, but market participants will closely watch the Geneva meeting and Fed commentary for further direction.
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