Forex reserves climb to USD 693.32 billion

1. Rupee closes at 89.98 against the US dollar
2. FII outflows and importer demand weigh on currency
3. Sensex and Nifty end lower, hurting sentiment
4. Brent crude rises to USD 61.54 per barrel

The Indian rupee depreciated by eight paise to close at 89.98 (provisional) against the US dollar on Monday, pressured by sustained foreign fund outflows, firm demand for the greenback from importers and a negative trend in domestic equity markets.

At the interbank foreign exchange market, the rupee opened at 89.95 against the dollar and traded in a narrow range throughout the session. It touched an intra-day low of 89.99 and a high of 89.88 before settling just below the 90-mark. On Friday, the local unit had declined sharply by 19 paise to close at 89.90, reflecting persistent weakness in the currency.

Forex traders said continuous selling by foreign institutional investors and cautious global sentiment weighed on the rupee. Importers’ dollar demand further added to the pressure, especially during the thin year-end trading period. Market participants are closely tracking global cues as uncertainty over interest rate trajectories in the US continues to influence currency movements.

Analysts noted that upcoming releases of the Federal Open Market Committee minutes and the core Personal Consumption Expenditures price index from the US could provide fresh direction to the USD/INR pair. According to market experts, the rupee is expected to trade within a range of 89.60 to 90.20 in the near term, depending on global data and risk appetite.

The dollar index, which measures the strength of the US currency against a basket of six major currencies, was trading marginally higher at 98.03. Most global markets remain in a holiday mood, resulting in thin volumes and limiting sharp movements in the greenback. Meanwhile, Brent crude oil prices rose 1.48 per cent to USD 61.54 per barrel in futures trade, supported by year-end positioning and lingering concerns over global demand. Higher crude prices generally add pressure on the rupee, as India is a major oil importer.

Domestic equity markets ended lower, adding to the negative sentiment in the currency market. The 30-share Sensex declined 345.91 points to close at 84,695.54, while the broader Nifty fell 100.20 points to settle at 25,942.10. Exchange data showed that foreign institutional investors offloaded equities worth Rs 317.56 crore in the previous session.

On a positive note, India’s external buffer strengthened further. The Reserve Bank of India reported that the country’s foreign exchange reserves increased by USD 4.368 billion to USD 693.318 billion for the week ended December 19, providing comfort against external volatility.