Historic fall in rupee: Opened at 95.06 against dollar; Market turmoil due to crude oil inflation and fear of investors

The beginning of this morning was a bit worrying for the Indian economy and market. On June 2, the Indian rupee weakened further by 7 paise and opened at a record low of 95.06 against the US dollar in early trade. In the previous trading session, the rupee had closed at 94.99. The continuously rising prices of crude oil in the international market and the continuous withdrawal of foreign funds from the Indian stock market have had a very bad impact on the sentiments of investors.

Why is the Indian currency breaking? Understand the main reasons

Global market and geopolitical tensions have a big role behind this weakness of the rupee:

• Uncertainty in US-Iran talks: There is continuous volatility in the global oil market due to uncertainty regarding the ongoing diplomatic talks between America and Iran. After the huge rise in the last session, Brent Crude is still hovering around $ 95 per barrel. India imports about 80% of its oil needs, hence due to costlier crude oil, India’s expenses increase and the rupee comes under pressure.

• Selling by foreign portfolio investors (FPIs): Foreign investors are continuously withdrawing their money from the Indian stock market. According to exchange data, in just the last two trading sessions, foreign investors have sold Indian shares worth about $ 2.5 billion (approx. more than ₹ 20,000 crore).

• Big impact of Iran crisis: Since the Iran conflict started at the end of February this year, the total withdrawal of foreign funds from the Indian stock market has reached around $25 billion.

Dollar vs Rupee: Today’s key market figures

You can easily understand the current situation of the foreign exchange market and global signals from the table given below:

Experts’ warning: Can the dollar touch the 100 mark?

Market experts and traders say that despite the high prices of crude oil and continuous foreign selling, the Reserve Bank of India (RBI) is continuously interfering in the market. It is due to this intervention of RBI that the rupee has been saved from a major fall.

However, analysts at banking group MUFG have issued a big warning. He believes that if the tension in West Asia deepens further, then this trend of weakness in the rupee will continue. If there is any problem in the movement of ships around the Strait of Hormuz, then the value of the rupee against the dollar may slip to the psychological level of 98 and in the future even 100.

An atmosphere of caution among investors

At present, with the dollar index reaching a strong level of 99.19, other currencies of Asia are also trading in a limited range. Equity futures of the Indian stock market are also indicating a dull and soft start today, which shows that at this time domestic and foreign investors are avoiding taking any major risks in the market and are adopting a very cautious approach.