MUMBAI, March 6: The rupee snapped its three-day rally and settled with a loss of 6 paise at 87.12 against the US dollar on Thursday amid uncertainty over trade tariffs and persistent foreign fund outflows.
Forex traders said the depreciation in the Indian rupee was influenced by several factors, including the weakening of regional currencies, selling pressure from foreign investors, and a recovery in global commodity prices, all of which put downward pressure on the local currency.
While a positive equity market, weakness of the American currency in the overseas market and easing crude oil prices contained the losses for the local unit.
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At the interbank foreign exchange, the rupee opened stronger at 86.96 and touched the high of 86.88 against the greenback during the day. The unit later turned volatile and hit the day’s low of 87.16 before ending the session at 87.12 against the dollar, 6 paise lower from its previous closing level.
On Wednesday, the rupee settled 13 paise higher at 87.06 against the US dollar, registering the third straight day of gain. In the preceding two sessions, the unit had gained 18 paise.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the rupee lost initial gains and fell against the US dollar on selling pressure by FIIs, while the American currency fell to a four-month low as the US decided to delay implementing higher tariffs on imports from Canada and Mexico.
Choudhary further said the rupee is expected to trade with a slight positive bias on positive domestic markets and weakness in the US dollar. However, FII outflows may cap sharp gains in the local unit.
“Uncertainty over the trade tariff issue may also weigh on the rupee. Traders may take cues from weekly unemployment claims data from the US and ECB monetary policy decision. USD-INR spot price is expected to trade in a range of 86.80 to 87.25,” he added.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.31 per cent at 103.95.
Brent crude, the global oil benchmark, rose 0.17 per cent but stayed at six-month low levels of USD 69.42 per barrel in futures trade.
Additionally, market participants took advantage of the lower USDINR rates to close their short positions, further contributing to the rupee’s slide, said Dilip Parmar, Research Analyst, HDFC Securities.
Looking ahead, the USDINR exchange rate is anticipated to fluctuate within a range of 86.40 to 87.70 in the short term, he added.
In the domestic equity market, the 30-share BSE Sensex surged 609.86 points, or 0.83 per cent, to settle at 74,340.09, while the Nifty advanced 207.40 points, or 0.93 per cent, to close at 22,544.70 points. Both the indices had closed Wednesday’s session with a gain of more than 1 per cent.
Foreign institutional investors (FIIs) offloaded equities worth Rs 2,377.32 crore on net basis on Thursday, according to exchange data.
The Reserve Bank on Wednesday said it will conduct open market purchases of government securities and undertake USD/INR swaps totalling about Rs 1.9 lakh crore during the month.
On February 28, the central bank conducted a US dollar-rupee swap worth USD 10 billion to inject long-term liquidity into the system, with the auction eliciting robust demand. (PTI)
