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Market mood: rupee faces a negative bias
Forex traders say the rupee is likely to trade with a negative bias amid muted domestic markets and sustained foreign fund outflows. The combination of low local demand and continued selling by overseas investors is keeping pressure on the currency.
Why the rupee is under pressure
- Muted domestic markets: Thin trading activity at home reduces liquidity and makes the currency more vulnerable to moves in global markets.
- Foreign fund outflows: Continued withdrawals by foreign portfolio investors increase supply of the rupee in FX markets, tipping the balance toward depreciation.
What traders are watching
Market participants are closely monitoring flows and sentiment. Key things on their radar include:
- Daily foreign inflows and outflows for indications of sustained selling.
- Domestic market liquidity and participation levels.
- Global risk cues that can prompt further capital shifts.
Potential impact
A softer rupee can affect different parts of the economy:
- Importers: Face higher costs for goods and raw materials priced in foreign currency.
- Exporters: May gain some competitive advantage from a weaker currency, depending on demand.
- Consumers: Inflationary pressure could rise if import costs filter into prices.
Outlook
Until domestic market activity picks up or foreign fund flows stabilize, traders expect the rupee to lean weaker. Short-term moves will likely be driven by global risk sentiment and any shifts in investor appetite for local assets.