Indian Rupee / Will RBI be able to save the sinking rupee? This is how it collapsed in two days

The rupee has registered a huge decline for the second consecutive day. The rupee weakened by 51 paise in two days and closed at 85.90 against the dollar. The reason for the decline is foreign fund withdrawal and crude oil prices. Now all eyes are on the monetary policy of RBI, which is expected to provide support.

Indian Rupee: The Indian rupee has weakened for the second consecutive day in the currency market. A total decline of 51 paise has been registered in two days, which has increased the concern of investors. On June 2, when the rupee started June with strength, it indicated that the decline of May would soon be compensated. But the last two trading sessions have shocked the market and have given a clear indication that now the rupee needs some big support.

A ray of hope from RBI

This support can be found from the Reserve Bank of India (RBI) in the coming days. On June 6, the RBI's Monetary Policy Committee (MPC) may announce a cut in interest rates. It is expected that this cut can be from 25 to 50 basis points. If this happens, this step will boost investment and consumption, which can restore the confidence of foreign investors and the rupee can again take the path of strength.

Heavy fluctuations in the currency market

On Wednesday, the rupee closed 29 paise lower at 85.90 against the US dollar. Earlier on Tuesday, it closed 22 paise lower at 85.61. On Wednesday, the rupee opened at 85.69 on the Interbank Foreign Currency Exchange and traded in the range of 85.69 to 86.05 throughout the day. The decline was mainly due to the outflow of foreign funds, geopolitical tensions and a rise in crude oil prices.

Dollar index and foreign investors

The dollar index was trading slightly lower at 99.11, while FIIs sold shares worth Rs 2,853.83 crore on Tuesday. This is an indication of the caution of foreign investors, which is putting additional pressure on the rupee.

Some support found in the stock market

The BSE Sensex closed 260.74 points higher at 80,998.25 on Wednesday, while the Nifty closed 77.70 points lower at 24,620.20. Despite a slight rise in oil prices, stable demand in the domestic services sector and employment growth have provided partial strength to the Indian economy. The HSBC India Services PMI for May stood at 58.8, slightly better than 58.7 in April.

Conclusion: All eyes are on RBI's decision

The recent fall in the rupee has definitely created uneasiness in the market, but experts are confident that the Reserve Bank's upcoming policy announcement can provide relief. If interest rates are cut, it will increase domestic investment and can also boost foreign capital inflows. At present, the currency market is waiting for the RBI's announcement.