The rupee on March 8 declined by 23 paise to close at 73.25 against the U.S. dollar, extending its losses for the third session in a row due to rising crude oil prices and strengthening of the American currency in the overseas market.
The dollar rose to a three-and-a-half month high against a basket of six currencies globally helped by passage of $1.9 trillion stimulus package by the U.S. Senate, positive jobs data and rising bond yields.
At the interbank forex market, the local unit opened at 73.13 against the greenback and witnessed an intra-day high of 73.29 and a low of 72.93.
It finally ended at 73.25 against the American currency, registering a fall of 23 paise over its previous closing. The rupee has dropped by 53 paise or 0.73% in three sessions to March 8 mainly due to forex outflows from capital markets due to rising U.S. bond yields.
“Indian Rupee depreciated amid strong dollar and surge in crude oil prices. Crude oil prices increased after Saudi Arabia said its oil facility was attacked by drone. Further, OPEC and its allies had agreed to keep most of their production cuts in place,” said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
However, sharp fall may be prevented on positive domestic markets, Mr. Mukadam said adding that the rupee may trade in the range of 72.70 to 73.50 in the next couple of sessions.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.27% to 92.22.
Meanwhile, Brent crude futures, the global oil benchmark, rose 0.23% to $69.52 per barrel.
On the domestic equity market front, the BSE Sensex ended 35.75 points or 0.07% higher at 50,441.07, while the broader NSE Nifty climbed 18.10 points or 0.12% to 14,956.20.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth ₹2,014.16 crore on Friday, according to exchange data.
“The U.S. dollar gained tracking a broad rise in Treasury yields this Monday afternoon trade as concerns about rising inflation in the U.S. intensified after the U.S. Senate over the weekend passed President Joe Biden’s $1.9 trillion fiscal relief plan,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.
Meanwhile, most Asian currencies depreciated against the dollar and weighed on sentiments, Mr. Iyer said.
Traders said rising crude oil prices weighed on sentiments amid fears of widening trade deficit.
According to Dilip Parmar, Research Analyst, HDFC Securities the rupee is expected to trade with negative bias in coming days amid rising crude oil prices, higher U.S. bond yields and risk of outflows from domestic equities.
“Crude oil prices above $70/bbl may push country’s current account into deficit which has bigger implication for country’s balance sheet and inflation. Higher inflation and surplus liquidity will lead central bank to rethink accommodative policy,” Mr. Parmar said.
On the domestic front, market participants will be keeping an eye on inflation and industrial production number. An uptick in inflation could be slightly negative for the rupee. But at the same time, expectation is that the IIP could continue at a steady pace, Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services said.
“Continued dollar index strength is likely to weigh on major crosses and keep both euro and pound under pressure. We expect the USD-INR (Spot) to trade with a positive bias and quote in the range of 72.70 and 73.50,” Mr. Somaiyaa added.
