The rupee fell by 10 paise to 83.50 against the US dollar in early Monday trading, primarily due to the increase in the dollar index and US yields. According to forex traders, market player uncertainty decreased as Narendra Modi was sworn in on Sunday for a record-tying third term as Prime Minister. Nonetheless, the strong performance of the American currency in the global market put pressure on the local unit.
At the interbank foreign exchange market, the rupee started at 83.48 and continued to weaken, trading at 83.50 against the US dollar, marking a 10 paise decline from its previous close.
Market Reactions to Modi’s Third Term as Prime Minister
On Friday, the rupee had appreciated by 13 paise to 83.40 against the US dollar. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, attributed the rupee’s opening at 83.50 to the increase in the dollar index and US yields. He noted that the Reserve Bank of India (RBI) is expected to defend the rupee, as the current government policies will largely persist with Modi’s new cabinet.
Prime Minister Narendra Modi will lead a 72-member Union Council of Ministers, emphasizing continuity, youth, and experience, and rewarding partners in the BJP-led National Democratic Alliance (NDA). Senior BJP leaders Rajnath Singh, Amit Shah, Nitin Gadkari, Nirmala Sitharaman, and S. Jaishankar, who served in the Modi 2.0 cabinet, also took the oath as cabinet ministers at Rashtrapati Bhavan.
Meanwhile, the dollar index, which measures the greenback’s strength against six major currencies, was up 0.29% at 105.18. Brent crude futures, the global oil benchmark, rose by 0.31% to $79.87 per barrel. In the domestic equity market, benchmark indices Sensex and Nifty reached record highs in early trade. The 30-share BSE Sensex climbed 292.08 points, or 0.38%, to 76,985.44 points, while the broader NSE Nifty traded at 23,291.50 points.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Friday, purchasing shares worth Rs 4,391.02 crore, according to exchange data. Additionally, India’s forex reserves surged by $4.837 billion to a record high of $651.51 billion for the week ending May 31, as reported by the RBI. In the previous week, total reserves had decreased by $2.027 billion to $646.673 billion.
