Rupee Plunges to 96.26 Amid $18 Billion Reserve Drop

India's rupee continued its downward trend, falling to its weakest level in over two months against the US dollar on Monday. The currency closed at 96.26, as high crude oil prices and continued foreign fund selling kept the currency under pressure.

The rupee's struggles are attributed to the persistent upward momentum of the dollar. This has been driven by rising US yields at multi-year highs.

Regular interventions by the Reserve Bank of India have helped curb excessive daily fluctuations, according to forex traders. Nevertheless, the country's rising import costs and the dollar's persistent upward momentum remain a persistent drag on market sentiment. The RBI's efforts to stabilize the currency are being tested by the ongoing foreign fund selling.

This has resulted in the rupee losing value against the US dollar.

Read More: Jio Platforms IPO: Reliance Industries $3.8 Billion Listing Expected by October End

The Reserve Bank of India's (RBI) recent foreign exchange market interventions have yielded notable results. With the country's foreign exchange reserves plummeting by $18 billion to $748 billion. This substantial decline is largely attributed to the RBI's efforts to mitigate excessive daily fluctuations.

While the currency has stabilized, lingering concerns persist regarding the ongoing impact of foreign fund selling.

Markets are now watching several developments for their potential impact on the USD/INR pair. These include US services data, the Federal Reserve minutes and the RBI's policy decision on Wednesday, besides any confirmation from Saudi Arabia on weekend damage.

The dollar index was at 102.47, up 0.54 per cent, and the rupee's weakness is attributed to the high crude oil prices and continued foreign fund selling.

Foreign selling remained another pressure point for the currency. Foreign Institutional Investors offloaded equities worth Rs 9,484.22 crore on a net basis on Thursday, according to exchange data.

Also Read: GEC-III to Address Renewable Energy Curtailment with Rs 1.9 Lakh Crore Transmission Scheme

Dalal Street, however, began Monday's session on a positive note. BSE Sensex rose 413 points to 72,315, while NSE Nifty gained 131.55 points to trade at 22,554.20 in early trade.

As the rupee navigates a complex landscape, Kotak Securities' Head of Commodity and Currency Research, Anindya Banerjee, identifies a narrow window of opportunity within the 95.50-96.50 price range. There, oil prices above $100 could propel the currency upwards. The RBI's recent intervention has been highlighted by a significant decline in foreign exchange reserves.

Which plummeted by $18 billion to $748 billion. As the central bank seeks to counteract the impact of heavy foreign portfolio selling and multi-year high US yields.