Rupee Falls to 96.39 Against Dollar as Oil Prices Rise

India's Rupee continued its downward trajectory against the US dollar, falling by 4 paise to 96.39 in the morning session. The decline was attributed to a surge in crude oil prices and ongoing foreign investor selling.

Conversely, domestic equity gains and a weaker US dollar provided some respite to the currency.

Forex traders said the domestic currency opened at 96.29 at the interbank foreign exchange before falling to 96.39. The surge in crude oil prices, which rose to $100.63 per barrel, has put pressure on the rupee.

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Despite this, Dalal Street provided a positive backdrop, with the Sensex gaining 120.22 points to 72,535.41 in early trade, indicating a resilient domestic equity market.

Foreign Institutional Investors (FIIs) sold equities worth Rs 4,699.14 crore on a net basis on Monday, according to exchange data. This selling has been a drag on the domestic market, despite the positive sentiment from Dalal Street. The Reserve Bank's Monetary Policy Committee is in the middle of its three-day meeting.

Which began on Monday, and is poised to tighten its monetary policy, with a 25 basis point rate hike anticipated.

This move aligns with the central banks' increasingly hawkish stance. Driven by the escalating conflict in West Asia and its implications for domestic inflation. Since February 2023, the RBI has last adjusted the repo rate, a 0.25 per cent increase to 6.50 per cent.

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The AIQ, a benchmark for the Indian equity market, also reflects this trend, with its value increasing by 0.04 per cent to 102.12.

The dollar index, which tracks the greenback against a basket of six currencies, also fell 0.04 per cent to 102.12, indicating a weaker US dollar. This has provided some respite to the Indian rupee, which has been under pressure due to foreign investor selling.

The Reserve Bank's decision to raise interest rates will have a significant impact on the domestic economy. And investors are watching the market closely for any signs of market volatility.