The rupee saw a 7 paise depreciation to end at 83.38 against the US dollar on Friday, influenced by a significant sell-off in domestic equities and a strong greenback against major currencies abroad. Forex traders noted that high crude oil prices also impacted investor confidence. The local unit began trading at 83.36 and hit a low of 83.44 against the US dollar during the day. Ultimately, it settled at 83.38, marking a 7 paise loss from the previous close. On Wednesday, the rupee had closed at 83.31 versus the US dollar. Forex markets were shut on Thursday due to Eid-Ul-Fitr. Meanwhile, the dollar index, which measures the dollar’s strength against six currencies, was up by 0.51% at 105.82. The US dollar reached a five-month peak due to high inflation rates. Both headline and core inflation exceeded expectations, reducing the likelihood of a rate cut by the US Federal Reserve in June.
Hawkish FOMC meeting minutes further boosted the greenback. Forex traders warned that increasing crude oil prices could negatively impact the rupee, posing a threat to the country’s current account balance. Brent crude futures, the global oil benchmark, rose by 0.97% to USD 90.61 per barrel. Analysts anticipate the rupee to trade with a slightly negative bias amidst weak global equities, strong US data, and surging global crude oil prices. A bullish US dollar could further weigh on the rupee. However, Foreign Institutional Investor (FII) inflows might provide some support at lower levels. Market participants will monitor India’s inflation and Index of Industrial Production (IIP) data, as well as consumer sentiment and inflation expectations data from the US. The USD/INR spot price is forecasted to fluctuate between Rs 83.10 and Rs 83.70, according to Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
On the local stock market scene, the Sensex saw a decrease of 793.25 points, equivalent to 1.06 percent, settling at 74,244.90 points. Meanwhile, the Nifty dropped by 234.40 points, or 1.03 percent, to end at 22,519.40 points.
Foreign Institutional Investors (FIIs) were recorded as net sellers in the financial markets on Friday, having offloaded shares amounting to Rs 8,027 crore, as per data from the exchanges.
According to Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, the dollar index climbed to 105.35, causing a decline in various currencies, including the rupee. Despite this, the resilience of the Indian economy is anticipated to provide support to the rupee. Consequently, the rupee is projected to undergo lateral movement with heightened volatility, maintaining a range between 83.15-83.55.