Mumbai, Oct 24: The rupee dropped 4 paise to 83.16 against the US dollar on Monday due to sharp losses in local stocks and US bond yields surging to 5 per cent.
Easing crude oil prices and a flat greenback in the overseas markets helped cap the rupee’s fall, forex dealers said.
At the interbank foreign exchange market, the local unit opened lower at 83.15 and traded in a tight range of 83.19 and 83.09 against the greenback during the day.
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The local unit finally settled at 83.16, reflecting losses of 4 paise over the last close. On Friday, the rupee closed flat at 83.12 against the US dollar.
Forex markets will remain closed on Tuesday on account of Dussehra.
Analysts said hardening US bond yields amid a higher risk of broader conflict in the Middle East weighed on emerging currencies and riskier assets. The 10-year US Treasury was at 5 per cent on Friday.
“The rupee experienced weakness during the trading session. Concerns regarding potential escalations in geopolitical issues in the Middle East have contributed to this negative sentiment.
“Furthermore, the continued selling by Foreign Institutional Investors (FII) in the capital markets has put downward pressure on the rupee. It is important to note that while RBI interventions have been instrumental in stabilising prices and preventing the rupee from falling below 83.25, global uncertainties and geopolitical tensions can still have an adverse impact on the rupee’s value,” Jateen Trivedi, VP Research Analyst at LKP Securities said.
Increased apprehensions surrounding prolonged elevated interest rates fuelled a continued upward movement in the US 10-year yield, Vinod Nair, Head of Research at Geojit Financial Services said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, retreated from overnight highs and was almost flat at 106.21.
Crude oil prices eased on Monday, with the benchmark Brent crude declining by 0.23 per cent to USD 91.95 per barrel.
On the domestic equity market front, Sensex tanked 825.74 points or 1.26 per cent to settle at 64,571.88. The Nifty plunged 260.90 points or 1.34 per cent to 19,281.75.
Foreign Institutional Investors bought equities worth Rs 252.25 crore on Monday, according to exchange data.
Foreign Portfolio Investors have withdrawn over Rs 12,000 crore from Indian equities so far this month, mainly due to a sustained rise in US bond yields and the uncertain environment resulting from the Israel-Hamas conflict.
“Given the prevailing dynamics, the rupee’s trading range is anticipated to remain within 82.85-83.30. However, the rupee’s performance remains sensitive to global events and market sentiment,” Trivedi said. (PTI)
