Mumbai:
The rupee declined by 18 paise to close at 74.36 against the US dollar on Wednesday, tracking a strengthening American currency in the overseas market and higher crude prices.
However, a strong rally in domestic equities and unabated foreign fund inflows restricted the slide of the domestic unit, forex traders said.
At the interbank foreign exchange market, the local currency opened on a weak note at 74.24 and swung between the day’s high of 74.18 and a low of 74.50 to the US dollar.
The rupee finally settled at 74.36 against the greenback, down 18 paise over its previous close.
The rupee had ended at 74.18 on Tuesday.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.15 per cent to 92.87.
Meanwhile, Brent crude futures, the global oil benchmark, spiked 3.26 per cent to USD 45.03 per barrel.
“Indian rupee depreciated amid strong dollar and surge in crude oil prices. Further, rupee slipped on worries over a slowdown in global economic recovery due to resurgence in COVID-19 cases.
“Further, market remained cautious ahead of key macro-economic data like CPI and IIP… Rupee may trade in a range of 73.80 to 74.80 in next couple of sessions,” said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
The BSE Sensex surged 316.02 points or 0.73 per cent to close at a record 43,593.67.
Similarly, the broader NSE Nifty climbed 118.05 points or 0.93 per cent to its all-time closing high of 12,749.15.
Foreign institutional investors remained net buyers in the capital market as they purchased shares worth Rs 5,627.32 crore on Tuesday, according to provisional exchange data.
“India CPI data is likely to show that Inflation remained above the Reserve Bank of India medium-term target range of 2-6 per cent. India’s Industrial Production data forecasted to show factory output contracted for 7 consecutive months,” Mukadam added.
Devarsh Vakil, Deputy Head of Retail Research, HDFC securities, said, “Indian rupee fell in line with other Asian currencies as dollar index rebounded and tracking the spike in crude oil prices. Rupee has been relatively weak even after strong foreign fund flows of around USD 2.3 billion in equities as RBI chose to absorb the flows rather than letting currency appreciate.”
Oil futures rose after a report showed that US crude inventories fell by more than expected as prices continued to be supported by news of successful trials of a vaccine for coronavirus, he added.
Expectations of a recovery have boosted Asian currencies and led to a broad-based rally in Asian shares and capped losses in the domestic unit, said Sriram Iyer, Senior Research Analyst at Reliance Securities.
“The Indian Rupee depreciated against the US Dollar on constant dollar-buying by state-run lenders, rumoured to be on behalf of the central bank, to offset the impact of foreign inflows… So far the Indian equities and debt markets have already seen close USD 3 billion inflows this month and we believe that RBI could be present to mop the flows,” he added.
“We expect the USD/INR (Spot) to trade higher and quote in the range of 74.05 and 74.50,” said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
