Rupee Weakens to 95.97 Against US Dollar as Persistent RBI Dollar Sales Defend 96 Mark

The Indian rupee slipped 3 paise to trade at 95.97 against the US dollar in early trade, weighed down by persistent foreign exchange demand from state-run oil marketing companies and firm global crude prices. At the interbank foreign exchange market, the local unit opened at 95.87 before weakening toward 95.97 against the greenback, compared to its previous day close of 95.94.

Despite the depreciation pressure, aggressive dollar-selling interventions by the Reserve Bank of India (RBI) through state-owned lenders across both spot and forward markets successfully prevented the domestic currency from sliding past the psychologically vital 96.00 threshold.

Key Macro Pressures on the Exchange Rate

The domestic currency has faced intense headwind across multiple fronts:

• Elevated Energy Costs: International benchmark Brent crude traded higher by 0.82% at $103.43 per barrel in futures trade. High crude prices significantly expand India's oil import bill and boost domestic corporate dollar requirements.
• Foreign Institutional Outflows: Sustained withdrawals from foreign portfolio investors (FPIs) totaled approximately $2.2 billion during the month. On the preceding trading session alone, Foreign Institutional Investors offloaded net domestic equities worth ₹9,980.22 crore.
• Firm US Yields and Dollar Strength: The US Dollar Index, which measures the currency against a basket of six global counterparts, edged up 0.04% to 101.40, alongside resilient US Treasury yields that dampened appetite for emerging-market assets.

RBI Presence and Reserves Impact

Market participants highlighted that heavy central bank intervention has been essential in keeping the exchange rate bounded below 96.00.

"The Reserve Bank has been an active presence — dealers report state-run bank dollar sales, and the $14.9 billion fall in reserves to $766 billion in the latest week is consistent with sizeable intervention — while portfolio outflows of around $2.2 billion this month and firm US yields keep the pressure on," noted Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.

Domestic Market Reaction

While the currency remained constrained, benchmark equity indices displayed modest morning resilience. The BSE Sensex rose 190 points to 72,733.04, while the NSE Nifty gained 22 points to trade at 22,735.20.

However, market watchers cautioned that sustained depreciation toward record lows poses downside risks to domestic equities by raising imported raw-material expenses for manufacturing sectors, while forcing the central bank to maintain higher liquidity vigilance.

Tags: Reserve Bank of India Indian Rupee USDINR Kotak Securities BSE Sensex Nifty 50