In a volatile trading session on Wednesday, the Indian rupee depreciated by 4 paise to settle at 83.52 against the US dollar, pressured by elevated crude oil prices. This depreciation came as crude oil prices reached a two-week high on Tuesday, exerting downward pressure on the Indian currency.
At the interbank foreign exchange market, the rupee opened at 83.51 against the dollar, fluctuating between an intraday high of 83.49 and a low of 83.56 before closing at 83.52. This marks a slight drop from the previous day’s close of 83.48 per dollar.
Forex traders highlighted that the rising crude oil prices played a significant role in the rupee’s depreciation. However, the rupee’s decline was cushioned by a strong domestic equity market performance and positive macroeconomic data.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, noted, “We expect the rupee to trade with a slight positive bias on the softening of the US dollar and a rise in global risk sentiments. Strength in the domestic markets may also support sentiments. However, elevated crude oil prices and FII outflows may cap sharp upside. Traders may take cues from ADP non-farm employment, weekly unemployment claims, ISM services PMI, Challenger job cuts, trade balance, and factory orders data from the US. Investors may remain cautious ahead of FOMC meeting minutes.”
The dollar index, which measures the greenback’s strength against a basket of six currencies, was down 0.10 percent at 105.61. Meanwhile, Brent crude futures, the global oil benchmark, were trading 0.09 percent higher at USD 86.32 per barrel.
Despite the rupee’s dip, the domestic equity market witnessed robust gains. The BSE Sensex surged past the historic 80,000-mark, ending the day 545.35 points (0.69 percent) higher at 79,986.80 points. Similarly, the NSE Nifty reached a new lifetime high, closing 162.65 points (0.67 percent) up at 24,286.50 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth Rs 2,000.12 crore, according to exchange data.
On the domestic macroeconomic front, India’s services sector showed strong growth in June, rebounding from May’s five-month low. The seasonally adjusted HSBC India Services Business Activity Index rose from 60.2 in May to 60.5 in June, indicating a sharp expansion in output.
As the rupee continues to navigate through these mixed signals, market participants will closely watch upcoming economic data and global developments to gauge future movements.
