Thursday turned out to be another tough day for the Indian rupee as it continued to weaken against the US dollar. The currency opened at 88.62 in the Interbank Foreign Exchange Market, but intense selling pressure quickly dragged it down by 7 paise to 88.69. Analysts say the rupee’s decline is being driven by two key factors — the strong performance of the US dollar and weakness in domestic markets.

Dollar Shows Its Strength

Globally, the US dollar is gaining momentum. The dollar index, which measures the greenback’s strength against six major global currencies, rose by 0.02% to 99.51. This rise indicates that investors are shifting their money towards the dollar, viewing it as a “safe haven” amid global uncertainty.

As a result, not just the rupee, but several Asian currencies have come under pressure.

Stock Market Weakness Adds to Woes

The sentiment in the Indian equity markets also contributed to the rupee’s slide. On Thursday morning, trading started weak with the BSE Sensex falling 205.08 points to 84,261.43, while the NSE Nifty 50 slipped 61.15 points to 25,814.65 before recovering slightly later in the day.

FII Outflows Intensify the Decline

A major factor behind the rupee’s persistent pressure is foreign institutional investor (FII) selling. FIIs have been pulling out funds from Indian markets, putting additional strain on the currency.

On Wednesday alone, FIIs sold shares worth ₹1,750.03 crore. When foreign investors exit, they convert rupees back into dollars, increasing the demand for dollars and reducing the rupee’s value.

Some Relief from Trade Talks and Oil Prices

Despite the challenges, a couple of factors have helped prevent a deeper fall.

• India-US trade deal discussions: Markets are hopeful that progress in these talks could boost exports and increase future dollar inflows, providing some support to the rupee.

• Falling crude oil prices: Brent crude slipped 0.13% to $62.63 per barrel, which is positive for India. Since India pays for oil imports in dollars, cheaper oil helps reduce dollar outflows and supports the rupee.