The Indian rupee depreciated by 7 paise to trade at ₹85.45 per US dollar in early trading on May 29, weighed down by a stronger American currency, higher crude oil prices, and subdued domestic industrial production data.

Early Trade Movements in Forex Market

At the interbank foreign exchange market, the rupee opened at ₹85.56, reflecting initial pressure due to global developments and domestic concerns. However, it soon regained some ground to settle at ₹85.45, still 7 paise lower than the previous close of ₹85.38.

Forex traders noted that the rupee’s movement was influenced by a combination of external cues and domestic economic data, creating a cautious sentiment in the currency market.

US Dollar Strengthens After Court Order Sparks Trade Optimism

The major trigger behind the rupee’s decline was the strengthening of the US dollar globally. The US Dollar Index rose by 0.40% to 100.18, signaling renewed demand for the greenback. This spike was supported by a US federal court’s decision to block a key tariff order from former President Donald Trump, reviving hopes of easing global trade tensions.

This move was perceived positively by international markets, which expect a rollback of protectionist measures, encouraging safe-haven demand for the dollar and driving it higher against major currencies, including the rupee.

Crude Oil Price Surge Adds Pressure

Adding to the rupee's woes was a sharp rise in global crude oil prices. Brent crude jumped 1.11% to $65.62 per barrel, increasing India’s import costs, given its status as a major oil importer.

Rising crude prices generally weaken the rupee as they lead to a higher current account deficit and raise inflationary concerns. This directly affects India's trade balance, putting pressure on the local currency.

Disappointing Domestic Industrial Production Data

On the macroeconomic front, India's industrial production growth fell sharply to 2.7% in April 2025, down from 4.8% in March. The slowdown was attributed to subdued performance in manufacturing, mining, and power sectors.

This weak data raised concerns over the health of the Indian economy, further weighing on the rupee. Sluggish IIP growth signals reduced output and economic activity, potentially prompting investors to move capital to more robust economies.

Domestic Equity Markets Provide Some Support

Despite the weak rupee, domestic equity markets remained in the green, cushioning the currency from a steeper fall. The BSE Sensex surged by 350.27 points (0.43%) to 81,662.59, and the Nifty gained 94.05 points (0.38%) to reach 24,846.50.

These gains reflect investor optimism in Indian equities, which helped offset some of the rupee’s losses by attracting foreign capital.

Foreign Institutional Investors Continue Buying Spree

Foreign Institutional Investors (FIIs) offered some relief to the rupee through net equity purchases worth ₹4,662.92 crore on Wednesday. This consistent inflow of funds into Indian equities helped cap the rupee’s losses, showing continued global confidence in Indian markets despite macroeconomic concerns.

Conclusion: Rupee Remains Under Watch

The rupee's performance on May 29 highlights the sensitive interplay between global cues and domestic fundamentals. While a strong US dollar and rising crude prices pressured the local currency, support from FII inflows and equity markets prevented a sharper decline.

Going forward, the rupee will remain vulnerable to global developments, especially US economic data, Federal Reserve cues, oil price fluctuations, and domestic economic releases such as inflation and GDP figures.

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