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The Indian rupee has been weakening against the dollar for the past one month due to FPI outflows from Indian equities.
The rupee continues its downward trajectory.
Continuing its falling streak, the Indian rupee on Friday declined 5 paise to close at its fresh all-time low of 84.37 (provisional) against the US dollar. The domestic currency has been weakening for the past few weeks due to FPI outflows from Indian equities.
However, the rupee had also touched 84.38 during the day, before finally ending the day at its lowest closing of 84.37 against a dollar.
“The rupee has been on a low in the past few days though it is still the second-best performing currency amongst its pears after the election of Trump as the US president. However, FPIs and oil companies are constant buyers of the currency pair and therefore, we are not finding the rupee to gain. An RBI intervention in a big way may support the rupee,” said Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors.
Forex traders said the US Federal Reserve’s recent decision to cut interest rates signals a shift in the global financial landscape. Moreover, with Donald Trump’s tax and trade policies influencing global markets, volatility could re-enter the rupee’s trajectory.
At the interbank foreign exchange, the rupee opened at 84.32 against the US dollar. During the session, the local currency touched a high of 84.31 and a low of 84.38. It finally settled at 84.37 (provisional), a loss of 5 paise against its previous close.
On Thursday, the rupee slipped 1 paisa to close at a fresh lifetime low of 84.32 against the US dollar.
In the last three sessions, the local unit has lost 28 paise against the greenback.
The rupee hit a record low on account of extending sell-off in the domestic markets and continuous foreign fund outflows. Overnight gains in crude oil prices also weighed on the rupee, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
However, the softening of the US Dollar index cushioned the downside. The dollar softened as the US Federal Reserve cut interest rates by 25 bps in line with street estimates. The Fed Chair Jerome Powell said in his presser that the US economy was strong and some downside risks seemed to have diminished.
In its latest monetary policy announcement, the US Fed reduced its benchmark rate by 0.25 basis points to a target range of 4.5 per cent-4.75 per cent.
In its accompanying statement, the Fed adopted a neutral-to-dovish tone, acknowledging balanced risks in inflation and employment.
“We expect the rupee to trade with a negative bias on overall strength in the US dollar and weak domestic markets. FII outflows may also weigh on the rupee. However, any intervention by the Reserve Bank may support the rupee at lower levels,” Choudhary added.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.01 per cent lower at 104.50.
Brent crude, the global oil benchmark, fell 1.10 per cent to USD 74.80 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex fell 55.47 points, or 0.07 per cent, to close at 79,486.32 points, while Nifty declined 51.15 points, or 0.21 per cent, to settle at 24,148.20 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 4,888.77 crore, according to exchange data.
(With PTI Inputs)
