Rupee weakens past 85.95 as dollar demand rises ahead of RBI policy outcome

The rupee slipped 9 paise to 85.96 against the US dollar in early trade on Thursday amid strong dollar demand from importers and FIIs. Markets await RBI’s policy decision, while rising crude prices add pressure on India’s currency outlook.

Mumbai: The rupee depreciated 9 paise to 85.96 against the US dollar in early trade on Thursday, weighed down by dollar demand from foreign investors, oil companies, and importers.

Forex traders said market participants are now keenly awaiting the outcome of the Reserve Bank of India’s monetary policy meeting for further cues.

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The Reserve Bank’s rate-setting panel started its three-day brainstorming on monetary policy on Wednesday, and the outcome is scheduled to be announced on June 6.

At the interbank foreign exchange, the rupee opened at 85.86 and slipped further by 9 paise to 85.96 against the American currency in early trade over its previous close.

On Wednesday, the rupee depreciated for the second consecutive session and settled for the day lower by 26 paise at 85.87 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.07 per cent at 98.85.

Brent crude, the global oil benchmark, declined 0.14 per cent to USD 64.77 per barrel in futures trade.

“The Indian rupee weakened past the 86 mark against the US dollar, driven by a storm of global risk aversion and importer demand for dollars. Moreover, the sentiment remained fragile ahead of the central bank’s policy review,” CR Forex Advisors MD Amit Pabari said.

Meanwhile, the Russia-Ukraine tensions flared up once again, pushing Brent crude higher to USD 65.70 per barrel. For India, which is a net oil importer, this spells trouble, Pabari added.

In the domestic equity market, the 30-share BSE Sensex climbed 417.96 points or 0.52 per cent to 81,416.21, while the Nifty rose 125.05 points, or 0.51 per cent, to 24,745.25.

Foreign institutional investors (FIIs) purchased equities worth Rs 1,076.18 crore on a net basis on Wednesday, according to exchange data.