Downward trend of Rupee continues, touches lowest-ever closing level, why Rupee is weakening?
Mumbai: The downward trend of the Rupee continued on Monday, and for the first time, at the close of market trading, the exchange rate for one dollar was quoted above 96 rupees.
In the interbank currency market, the Rupee depreciated by 39 paise to close at 96.20 rupees per dollar—its lowest-ever closing level. Earlier in the trading session, it had touched a historic low of 96.3950 rupees per dollar.
On the previous trading day, the Indian currency had closed at 95.81 rupees per dollar, recording a decline of 17 paise. The Rupee opened 38 paise lower today at 96.19 rupees per dollar. During morning trade, it rose to a high of 96.12 rupees per dollar but subsequently came under pressure.
The Indian currency remained under pressure due to a surge in crude oil prices in the international market. However, the Rupee received some support from a 0.3 percent decline in the Dollar Index against a basket of other major global currencies.
Why Rupee is weakening?
India imports approximately 90% of its crude oil requirements; consequently, when global oil prices rise, the country is compelled to spend more dollars on imports. This exerts pressure on India's trade deficit and leads to a weakening of the Rupee.
Furthermore, driven by global uncertainty and sluggish progress in trade agreements, Foreign Institutional Investors (FIIs) have been consistently withdrawing their capital from Indian markets. This has placed even greater pressure on the Indian currency.
Another major contributing factor is the strengthening of the US Dollar. Elevated US Treasury yields—coupled with global economic uncertainty—are drawing investors toward the Dollar as a safe-haven asset, thereby driving up its demand across the globe.