The Indian rupee inched higher on Tuesday, closing at 89.65 against the US dollar, marking a modest gain of 3 paise from the previous session. Market analysts attributed the slight rise to a weaker US dollar, which generally supports emerging market currencies like the rupee.
The rupee had opened slightly stronger at around 89.67 at the interbank foreign exchange market but quickly gave up those gains as buying interest in the dollar picked up. Dealers said the early optimism faded as traders reacted to ongoing selling by foreign institutional investors, which has been a key factor weighing on the currency.
Foreign investors have been pulling money out of Indian markets in recent sessions. This has increased demand for the US dollar, putting downward pressure on the rupee. Adding to this, Indian companies were seen buying dollars to pay for imports and to hedge future foreign currency needs.
Market participants said the overall mood remains cautious. Although the Reserve Bank of India has stepped in at times to limit sharp movements in the currency, the rupee has struggled to hold on to gains. The central bank’s efforts are mainly aimed at reducing volatility rather than defending any specific level.
The rupee has also been affected by a firm US dollar globally. As the greenback remains strong in international markets, most emerging market currencies, including the rupee, have faced selling pressure.
Traders noted that importers continue to actively buy dollars, while exporters are selling cautiously, waiting for more favourable exchange rates. This imbalance in demand and supply has kept the rupee under stress.
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