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The Indian rupee experienced a sharp decline of 15 paise against the US dollar, settling at 83.44 in early trading on Wednesday, amid subdued trends in the domestic equity market, according to PTI reports.
At the interbank foreign exchange market, the rupee opened at 83.38, reflecting a 9 paise drop from its previous close, before slipping further to 83.44. This marked a significant decline of 15 paise compared to Tuesday's flat closing rate of 83.29 against the dollar.
Analysts have attributed the rupee's weakening to tight domestic liquidity conditions, driven by substantial Goods and Services Tax (GST) payments by industries. "Banking liquidity dipped into deficit territory as industry players paid approximately Rs 1.6-1.8 lakh crore in GST payments," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP. This marked the first liquidity deficit in over two months. Additionally, intervention by the Reserve Bank of India (RBI) in forex markets to support the rupee further pressured liquidity.
Bhansali predicted that the rupee is likely to trade within a range of 83.00 to 83.50 in the short term, with markets closely monitoring the release of key US economic data later in the day.
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In global markets, the dollar index, which measures the greenback's strength against a basket of six major currencies, was down by 0.15 per cent, trading at 106.84. Brent crude, the global benchmark for oil prices, also saw a marginal dip of 0.10 per cent, trading at USD 72.74 per barrel in futures trade.
On the domestic equity front, the 30-share BSE Sensex was trading 46.69 points lower, a 0.06 per cent decline, at 79,957.57 points during early trade.
Despite the rupee's decline, Foreign Institutional Investors (FIIs) remained net buyers in the Indian capital markets on Tuesday, purchasing shares worth Rs 1,157.70 crore, according to stock exchange data.
The decline in the rupee reflects ongoing economic pressures but remains mitigated by supportive factors such as a weaker dollar and stable crude oil prices, as per PTI.
(With inputs from PTI)
