Currency Market News: Rupee weakens for second straight session, settles 29 paise lower at 85.90 vs dollar

Rupee depreciated for the second consecutive session on Wednesday, closing 29 paise lower at 85.90 (provisional) against the US dollar. The decline was driven by risk-averse investor sentiment, foreign fund outflows, and cautious trading ahead of the Reserve Bank of India’s monetary policy decision due later this week.

According to forex traders, local currency remained under pressure amid escalating geopolitical tensions between Russia and Ukraine, and elevated global crude oil prices, which pushed up India’s import bill and added pressure on the exchange rate. Brent crude futures were up 0.41 per cent at $65.90 per barrel.

Also Read:Currency Market News: Rupee slips 21 paise to 85.60 vs US dollar

RBI may go for repo rate cut: Analysts

The Reserve Bank’s Monetary Policy Committee (MPC) began its three-day meeting today, with the outcome scheduled for June 6. Analysts expect the central bank to cut the repo rate by 25 basis points, while SBI Research has predicted a ‘jumbo’ 50 bps rate cut in a bid to support growth.

LKP Securities’ VP Research Analyst – Commodity and Currency, Jateen Trivedi, said: “Rupee traded weak by 25 paise at 85.87, inching closer to the 86.00 mark, as foreign investors remained in sell mode ahead of the RBI policy announcement. With key US data lined up, volatility is expected to remain elevated. The rupee may trade in the 85.50 to 86.40 range.”

Market movement and FII activity

At the interbank foreign exchange market, the rupee opened at 85.69 and traded in the range of 85.69 to 86.05 against the dollar during the day. It eventually settled at 85.90, extending its two-day fall to 51 paise.

Meanwhile, the dollar index was down 0.12 per cent at 99.11. Foreign Institutional Investors (FIIs) continued their selling spree, offloading Rs 2,853.83 crore worth of Indian equities on Tuesday, according to exchange data.

Also Read:Final Trade: Nifty settles at 24,620; metal and IT stocks lead gains 

Stock market snapshot

On the domestic macroeconomic front, India’s services sector activity remained strong in May, supported by robust demand and improved staffing. The HSBC India Services PMI Business Activity Index inched up to 58.8 in May from 58.7 in April, reflecting sustained expansion in the sector.

In equity markets, both indices posted gains — the BSE Sensex rose 260.74 points to 80,998.25, and the Nifty 50 climbed 77.70 points to 24,620.20, defying weakness in the rupee.

(With inputs from PTI)