Rupee Snaps 4-day Winning Streak, Drops 9 Paise Vs Dollar As Muted Domestic Equities Weigh on Market
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The rupee snapped its four-session winning run to close 9 paise lower at 72.55 against the US dollar on Tuesday as muted domestic equities and a strengthening greenback overseas weighed on market sentiment. At the interbank forex market, the local unit opened at 72.46 against the American currency and witnessed an intra-day high of 72.37 and a low of 72.64.
It finally ended at 72.55, registering a fall of 9 paise over its previous closing. On Monday, the rupee had settled at 72.46. “Indian Rupee depreciated amid strong dollar and muted domestic markets. Further, rupee slipped on disappointing macroeconomic data,” said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
Additionally, market remained cautious ahead of major central banks monetary policy meetings, Mukadam said. However, sharp downside was prevented on softening of crude oil prices.
Crude oil prices slipped on concern about slow pace of vaccination in the EU after Germany, France and Italy joined other European nations to hit pause on the AstraZeneca COVID-19 vaccine, Mukadam said. Rupee may trade in the range of 72.25 to 73.00 in next couple of sessions, he added.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.04 per cent to 91.87. Meanwhile, Brent crude futures, the global oil benchmark, fell 1.51 per cent to USD 67.84 per barrel.
On the domestic equity market front, the BSE Sensex ended 31.12 points or 0.06 per cent lower at 50,363.96, while the broader NSE Nifty fell 19.05 points or 0.13 per cent to 14,910.45. Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,101.35 crore on Monday, according to exchange data.
“After four days of winning streak, rupee fell following firmer dollar ahead of the Federal Reserve’s key monetary policy meeting,” said Dilip Parmar, Research Analyst, HDFC Securities. Parmar further noted that on the domestic front, the decision of fresh restrictions by many states following rise in COVID-19 cases impacted risk sentiment amid foreign fund outflows.
“All eyes will remain on the Federal Open Market Committee (FOMC) meeting outcome announcement tomorrow as comments from the Fed will be important for the dollar movement and risk sentiment,” he said. Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services, said the rupee after appreciating in the last couple of sessions fell against the US dollar on Tuesday following continued weakness in domestic equities and as the dollar strengthened against its major crosses ahead of the FOMC policy statement. “Market participants are cautious ahead of the Federal Reserve, Bank of England and Bank of Japan policy statements that will be released this week,” Somaiyaa said.
From the US, focus will be on retail sales and industrial production numbers. Better-than-expected economic data could extend gains for the greenback, he said, adding that “we expect the USDINR (Spot) to trade sideways and quote in the range of 72.20 and 72.80.”.
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