The Indian rupee ended 2 paise lower at 83.56 (provisional) against the US dollar on Friday, consolidating within a narrow range despite positive domestic market trends and a decline in crude oil prices. The rupee’s resilience was tested by a strong US dollar and foreign institutional investor (FII) outflows, which capped any significant gains.
Forex traders noted that the rupee maintained stability against the dollar, influenced by a hawkish stance from the Federal Open Market Committee (FOMC) and comments from Fed Chair Jerome Powell. The local currency opened at 83.54 at the interbank foreign exchange market and settled the day slightly lower.
On Thursday, the rupee had already dropped by 6 paise, closing at 83.54 against the US dollar. “We expect the rupee to trade with a slight negative bias on the strong US dollar and weak global markets. However, a positive tone in the domestic markets and expectations of fresh foreign inflows may support the rupee at lower levels,” stated Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
The dollar index, which measures the greenback against a basket of six major currencies, was trading higher by 0.40 percent at 105.61. Meanwhile, Brent crude futures, the global oil benchmark, saw a minor decline of 0.12 percent, settling at USD 82.65 per barrel.
On the domestic macroeconomic front, India’s merchandise exports in May 2024 rose by 9 percent to USD 38.13 billion. Imports also saw an increase, rising 7.7 percent to USD 61.91 billion compared to USD 57.48 billion in May 2023, as per government data released on Friday. This resulted in a trade deficit of USD 23.78 billion for the month.
Adding to economic concerns, wholesale inflation climbed for the third consecutive month in May, reaching 2.61 percent due to rising prices of food articles, particularly vegetables, and manufactured items.
Despite these economic pressures, domestic equity markets performed well. The 30-share BSE Sensex climbed 181.87 points, or 0.24 percent, to a new peak of 76,992.77 points. Similarly, the broader NSE Nifty rose by 66.70 points, or 0.29 percent, to close at an all-time high of 23,465.60 points.
Foreign Institutional Investors (FIIs) were net sellers on Thursday, offloading shares worth Rs 3,033.00 crore, according to exchange data. Despite this, market sentiment remained buoyant.
In a positive note for the future, Moody’s Ratings announced that India is expected to remain the fastest-growing economy in the Asia-Pacific region in 2024, maintaining its domestically-driven growth momentum from last year.
As global and domestic factors continue to influence the rupee’s trajectory, traders and investors will keep a close watch on developments, particularly regarding the Fed’s policy directions and India’s trade performance.
