Rupee marginally higher by 1 paisa at 84.07 against US dollar on weak market sentiment

The Indian rupee remained almost flat in early trade on Wednesday, trading just 1 paisa higher at 84.07 against the US dollar. Despite the marginal improvement, the currency continued to feel the pressure from the strengthening US dollar and sustained foreign fund outflows, according to analysts.

Forex traders noted that while the rupee opened 1 paisa higher at 84.07 at the interbank foreign exchange market, it traded largely flat during early deals. The rupee had settled at 84.08 against the dollar on Tuesday, continuing its weak performance since hitting its lowest level of 84.10 on October 11.

Market experts suggest that the rupee has been under considerable pressure due to foreign institutional investors (FIIs) offloading Indian equities in favour of better opportunities in other markets, particularly China. This FII exodus has been a major factor in the rupee's struggle to recover in recent sessions. Additionally, concerns over the US Federal Reserve's pace of future rate cuts, triggered by a surge in US treasury yields, have pushed investors towards safer assets, further weighing on the rupee.

As reported by PTI, the dollar index, which measures the dollar's performance against a basket of six major currencies, rose slightly by 0.06 per cent to 103.97, adding further strain to the rupee's performance.

The rise in crude oil prices has also been a factor preventing any significant recovery for the Indian currency. Brent crude, the global oil benchmark, was trading 0.22 per cent lower at USD 75.87 per barrel in futures trade, though the price remains elevated by historical standards.

On the domestic equity front, both major indices posted losses, extending their declines from the previous day. The BSE Sensex fell by 96.34 points, or 0.12 per cent, to 80,124.38, while the NSE Nifty was down 32.95 points, or 0.13 per cent, to 24,439.15. Both indices had seen a more pronounced drop of over 1 per cent on Tuesday, further contributing to the rupee's weak performance.

Foreign institutional investors were net sellers in the capital markets on Tuesday, offloading shares worth Rs 3,978.61 crore, according to exchange data.

In conclusion, while the rupee showed a slight improvement in early trade, broader market dynamics, including foreign fund outflows and a strong dollar, continue to pose challenges for any significant recovery in the near term.

(With inputs from PTI)