Image for representation only. Photo Credit: V. Sudarshan
The rupee depreciated by 41 paise to close at 81.93 (provisional) against the US dollar on Tuesday after the Economic Review 2022-23. current account deficit,
Forex traders said significant foreign fund outflows and a muted trend in domestic equities also weighed on investor sentiment.
At the interbank foreign exchange, the domestic unit opened weak at 81.61 against the dollar and lost further ground to slide below 82 levels per US dollar. The rupee finally settled at 81.93, down 41 paise over its previous closing price.
During the session, the local unit witnessed an intra-day high of 81.58 and a low of 82.07 against the US dollar. The rupee had closed at 81.52 against the American currency in the previous session on Monday.
Meanwhile, the dollar index, which gauges the strength of the dollar against a basket of six major currencies, rose 0.15 per cent to 102.43.
Global oil benchmark Brent crude futures fell 1.18% to $83.90 a barrel.
Forex traders said investors are gearing up for the interest rate decision from the Federal Reserve and the Union Budget for 2023-24, both to be announced on Wednesday.
The Economic Survey said that the Indian rupee may remain under depreciation pressure due to stagnation in exports and subsequent widening of current account deficit.
The country’s current account deficit (CAD) widened to 4.4% of GDP in the quarter ended September, from 2.2% in April-June, due to higher trade gap, according to the latest data from the Reserve Bank of India.
According to the survey, while commodity prices have retreated from record highs, they are still above “pre-conflict” (Russia-Ukraine war) levels.
Strong domestic demand amid higher commodity prices will push up India’s overall import bill and contribute to adverse developments in the current account balance.
“These may further worsen as export growth stagnates due to subdued global demand. Should the current account deficit widen further, currency depreciation,” said the key document released a day ahead of the presentation of the Union Budget 2023-24. Can come under pressure.”
In the domestic equity market, the 30-share BSE Sensex was trading 49.49 points or 0.08% higher at 59,549.90. The broader NSE Nifty rose 13.20 points, or 0.07%, to 17,662.15.
Foreign institutional investors (FIIs) were net sellers in the capital market on Monday as they sold shares worth ₹6,792.80 crore, according to exchange data.