Rupee slides to 1-month low against dollar on forex outflows
Mumbai: The rupee on Tuesday depreciated by 18 paise to close at a nearly one-month low of 74.78 against the US dollar due to month-end dollar demand from oil importers, forex outflows and a stronger dollar in overseas markets.
Investors’ weak appetite for riskier assets also weighed on the rupee. Moreover, market participants are now eyeing the US Fed’s meeting outcome for further cues.
At the interbank foreign exchange market, the local currency opened at 74.60 against the greenback and witnessed an intra-day high of 74.57 and a low of 74.80 during the session.
The rupee finally settled at 74.78, down by 18 paise over its previous close of 74.60. This is the second straight session of loss for the local unit and the lowest closing level since December 27, 2021. The rupee has declined by 33 paise against the American currency in two days.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.22 per cent up at 96.12.
“Rupee becomes the worst-performing currency among Asian currencies. Even after a sharp rebound in domestic equities, forex market traders were uncomfortable to take risk ahead of the holiday and the Federal Open Market Committee (FOMC) meeting,” said Dilip Parmar, Research Analyst, HDFC Securities.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian Rupee depreciated and settled at a one-month low tracking the weak regional equities and currencies which also extended losses on Tuesday on the likelihood that the Federal Reserve will normalise monetary policy at a faster pace.
Indian financial markets will be closed on Wednesday for Republic Day.
The rupee also weakened on the back of risk-off trades amid the potential for military conflict between Russia and Ukraine. Moreover, stronger crude oil prices also weighed on sentiments this Tuesday, Iyer said.
“Rupee traded weak as dollar index traded positive on an anticipated hike from the US Fed in its first policy of 2022,” said Jateen Trivedi, Senior Research Analyst at LKP Securities.
The rupee has been facing support around 75.00 zones whereas resistance near 74.25-74.30. The US Fed meeting and Union Budget will be the next key triggers watched by traders and investors.
“Range for the rupee can be seen between 74.50 – 75.10,” Trivedi said.
Brent crude futures, the global oil benchmark, rose 1.48 per cent to USD 87.55 per barrel.
On the domestic equity market front, the BSE Sensex ended 366.64 points or 0.64 per cent higher at 57,858.15, while the broader NSE Nifty rose by 128.85 points or 0.75 per cent to 17,277.95.
Foreign institutional investors remained net sellers in the capital market on Monday, as they offloaded shares worth Rs 3,751.58 crore, as per stock exchange data.