Mumbai, Apr 7 (PTI) The rupee declined 19 paise to close at 75.95 (provisional) against the US dollar on Thursday as the hawkish stance of the US Federal Reserve affected investor sentiments in global markets and bolstered the American currency.
A negative trend in domestic equities and elevated oil prices amid the Russia-Ukraine conflict added to the woes, forex traders said.
At the interbank foreign exchange, the rupee opened lower at 75.88 against the US dollar, then slipped further to quote 75.99. It finally settled at 76.03, down 19 paise over its previous close.
On Wednesday, the rupee tanked 55 paise, its steepest single-day fall in a month, to close at a one-week low of 75.84 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.04 per cent higher at 99.64.
“The rupee continued to remain under pressure following broader strength in the dollar after the FOMC meeting minutes showed that the central bank would aggressively look to raise rates in the coming meeting,” said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
On the domestic front, the focus will be on the RBI policy statement and the expectation is that the central bank could keep rates unchanged but what their outlook is on inflation and growth going ahead could trigger volatility in the currency, Somaiya added.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the rupee weakened versus the dollar this Thursday in line with a broader risk-off sentiment in the global markets.
Additionally, the rupee may have also weakened this Thursday amid dollar purchases by state-run banks on behalf of crude refiners. Asian currencies and equities broadly weakened, while oil was higher this Thursday afternoon session and weighed on sentiments, Iyer added.
Global oil benchmark Brent crude futures jumped 1.52 per cent to USD 102.61 per barrel.
“Rupee drifted towards psychological 76 as dollar heads towards a century after Fed officials are shifting from ultra-loose monetary policy to an aggressive tightening policy,” said Dilip Parmar, Research Analyst, HDFC Securities.
The hawkish Fed augurs well for the dollar and pushed risky assets in emerging markets lower.
The near-term focus will remain on the RBI monetary policy stance, it has maintained an accommodative stance in the last 11 policy meetings, Parmar added.
According to Parmar, the RBI is likely to keep its accommodative stance to support the economy but could revise inflation higher and lower growth projections. Spot USD/INR is expected to trade in the range of 76.25 to 75.80.
“The dollar index has surged close to two-year highs as the US Fed March meeting minutes have indicated that the Fed is preparing to move aggressively to curb high inflation at its future meetings.
“Besides, prospects of further sanctions being imposed on Russia by the Western nations have spooked the market sentiments,” Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd.
Sachdeva further said that “geopolitical worries, elevated inflation, and concerns about downside risks to growth from the rising prospects of bigger interest rate hikes by the US central bank this year remain the key headwinds for the domestic currency”.
On the domestic equity market front, the 30-share Sensex ended 575.46 points or 0.97 per cent lower at 59,034.95, while the broader NSE Nifty plunged 168.10 points or 0.94 per cent to 17,639.55.
Foreign institutional investors remained net sellers in the capital market on Wednesday as they offloaded shares worth Rs 2,279.97 crore, according to stock exchange data. PTI DRR BAL BAL
