The Indian Rupee depreciated 15 paise to close at 89.86 against the US Dollar on Friday, marking a significant decline from the previous session. The domestic currency faced pressure from multiple factors including foreign fund outflows, rising crude oil prices, and trade deal uncertainties that dampened investor sentiment.

Intraday Trading Performance

The rupee opened at 89.84 against the US Dollar at the interbank foreign exchange market before touching an intraday low of 89.94, representing a 23-paise loss from its previous close. However, the currency managed to pare some losses by the end of the trading session.

Market Pressures and Global Factors

Forex traders attributed the rupee's weakness to several key factors affecting the USD/INR pair. The currency faced headwinds from a shift toward risk aversion, driven by persistent capital withdrawals from foreign investors ahead of the holiday break. Additionally, heightened greenback demand from importers and recovery in crude oil prices further pressured the domestic currency.

The dollar index, which measures the greenback's strength against six major currencies, traded 0.10% higher at 98.07. Meanwhile, Brent crude, the global oil benchmark, was trading 0.26% higher at 62.41 per barrel in futures trade.

Domestic Market Impact

The rupee's decline coincided with weakness in domestic equity markets. The Sensex dropped 367.25 points to settle at 85,041.45, while the Nifty declined 99.80 points to 26,042.30. Foreign institutional investors continued their selling spree, offloading equities worth ₹1,721.26 crore on Wednesday, according to exchange data.

Previous Session Context

On Wednesday, the rupee had pared initial gains and settled lower by eight paise at 89.71 against the US Dollar. Forex and equity markets remained closed on Thursday for Christmas, making Friday's session particularly significant for gauging market sentiment after the holiday break.

The Indian rupee weakened against the US dollar on Wednesday, closing 16 paise lower at 89.79 despite showing initial strength during early trading hours. The currency's decline came amid persistent foreign capital outflows and strong demand for the greenback from bullion importers.

Trading Session Performance

The rupee's trading session revealed significant volatility throughout the day. The currency opened at 89.56 against the US dollar and reached an intraday high of 89.51, representing a 12-paise gain from the previous close. However, these early gains were completely erased by the session's end.

Market Drivers and Analysis

Dilip Parmar, Senior Research Analyst at HDFC Securities, attributed the rupee's decline to a shift toward risk aversion. The primary factors driving this weakness included persistent capital withdrawals from foreign investors leading up to the holiday break and heightened greenback demand from bullion importers.

Despite the Reserve Bank of India's announcement of USDINR swaps and Open Market Operations, these measures failed to ignite market enthusiasm. Parmar noted that the interventions "did little to bridge the widening gap between dollar supply and demand ahead of year-end."

Technical Outlook and Global Factors

The outlook for spot USDINR maintains an upward trajectory, provided it holds above the 89.00 mark. However, the 90.30 level continues to act as formidable resistance for further gains, according to market analysts.

Global market conditions also influenced the rupee's performance:

• Dollar Index: Trading 0.13% lower at 97.81
• Brent Crude: Trading 0.22% higher at $62.52 per barrel
• Sensex: Declined 116.14 points to 85,408.70
• Nifty: Dropped 35.05 points to 26,142.10

RBI Intervention Measures

The Reserve Bank of India announced significant liquidity injection measures on Tuesday. The central bank will purchase government securities worth ₹2 lakh crore and conduct a $10 billion buy/sell dollar-rupee swap auction to inject liquidity into the banking system.

This latest announcement follows recent measures where the RBI conducted ₹1 lakh crore OMO purchase auctions of Government of India securities and a $5 billion USD/INR Buy/Sell Swap auction for a three-year tenor.

Foreign Investment Flows

Foreign Institutional Investors continued their selling pressure on Indian markets, offloading equities worth ₹1,794.80 crore on Tuesday, according to exchange data. This persistent outflow has been a key factor contributing to the rupee's weakness and broader market volatility.