Indian Rupee Slips as RBI Announces Withdrawal of 2,000 Rupee Denomination Notes
The Indian rupee experienced a downward trend against the US dollar, opening 13 paise lower at 82.79 as compared to its previous close of 82.66 per dollar. This decline can be attributed to the recent announcement made by the Reserve Bank of India (RBI), stating its intention to withdraw the ₹2,000 denomination currency notes from circulation. Despite this withdrawal, the ₹2,000 notes will continue to be considered legal tender.
The decision by the RBI to remove the ₹2,000 notes from circulation has raised concerns among traders and investors, resulting in a negative sentiment towards the Indian rupee. This move is likely to impact the
availability of higher denomination currency notes in the economy, potentially affecting liquidity and overall market dynamics. Market participants anticipate intervention from the Reserve Bank of India near the 82.80 level, aiming to stabilize the rupee's value.
Meanwhile, the US dollar index experienced a decline following unexpected breakdowns in US debt ceiling negotiations. Additionally, comments from Federal Reserve chair Jerome Powell, indicating a preference for a slower pace of rate hikes, influenced the dollar's performance. The euro strengthened further against the dollar, while the British pound and Australian dollar also displayed minor gains.
In terms of global markets, crude oil prices saw a decline due to
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concerns over China's demand recovery, despite supply reductions from Canada and OPEC producers. The ongoing US debt ceiling talks also contributed to investor caution. Brent crude futures fell by 0.6% to $75.10 per barrel, while US West Texas Intermediate (WTI) crude for July delivery dropped by 0.6% to $71.24.
The Asian stock markets remained cautious ahead of the resumption of US debt ceiling negotiations, which had temporarily paused. Similarly, Indian markets displayed a sharp decline in the pre-opening session, reflecting the negative sentiment prevailing in global equities.
Foreign institutional investors (FIIs) were observed as net sellers of Indian shares worth ₹113.46 crore, while domestic institutional
investors (DIIs) were net buyers of shares worth ₹1,071.35 crore, according to data from exchanges.
In conclusion, the Indian rupee opened lower against the US dollar following the announcement by the RBI to withdraw ₹2,000 denomination currency notes from circulation. This decision has raised concerns among traders and investors, impacting the rupee's performance. Global currency market trends indicate a decline in the US dollar index, while the euro, British pound, and Australian dollar experienced slight gains. Crude oil prices faced downward pressure due to apprehensions about China's demand recovery. Asian stock markets, including India, remained cautious amid the resumption of US debt ceiling talks.