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In the face of soaring crude oil prices, the Indian rupee experienced a fresh record closing low against the US dollar on Monday. The local currency concluded the trading day 8 paise lower at 83.27 against the dollar, compared to the previous day's closing rate of 83.19.
The decline in the Indian rupee can be attributed to several factors, including elevated crude oil prices, a stronger US dollar, foreign fund outflows, weakness in domestic equities, and a widening trade deficit.
The US dollar index, which measures the strength of the greenback against a basket of six major currencies, saw a minor decrease of 0.11% to 105.20.
Analysts have expressed concerns over the rupee's performance in the near term, with predictions that the USD/INR exchange rate could potentially surpass the record high and reach levels between 83.50 to 83.70, although it may find some support around the 83 mark.
India's merchandise trade deficit reached a 10-month high of $24.16 billion in August, exceeding expectations of $21 billion. This was primarily due to sluggish exports driven by weak demand in Western and Chinese markets.
Additionally, India's foreign exchange reserves fell by $4.992 billion to $593.904 billion for the week ending September 8, as reported by the Reserve Bank of India.
Crude oil prices remained a key factor affecting the Indian currency. Brent crude futures rose by 0.44% to $94.34 per barrel, while US West Texas Intermediate crude futures rallied by 0.65% to $91.36 per barrel.
Investors are closely monitoring central bank decisions, starting with the US Federal Reserve meeting on Wednesday, followed by the Bank of England and the Bank of Japan.
On the domestic front, Indian stock market indices ended an 11-session winning streak on Monday, closing in negative territory due to losses in heavyweight stocks amid weak global cues. The Sensex closed 241.79 points (0.36%) lower at 67,596.84, while the Nifty ended 59.05 points (0.29%) lower at 20,133.30.
Foreign institutional investors (FIIs) were net buyers of Indian shares worth ₹164.42 crore on Friday, while Domestic Institutional Investors (DIIs) purchased shares amounting to ₹1,938.57 crore, according to provisional data available on the exchanges.
Also read, Warning Issued by Top-Performing Fund as India's Stock Market Euphoria Continues
