The Indian rupee opened on a weaker note, depreciating by 5 paise against the US dollar in early morning trade Thursday as higher oil prices and a stronger greenback continued to pressurise the battered Asian currency.
The dollar to rupee conversion today rose to 74.375 against the U.S. currency, up from Wednesday’s close of 74.325. The rupee has lost over 170 paise so far this month and weakened over 14 paise in the last four trading sessions.
“The rupee weakened further against the US dollar and closed at 74.32 levels, down 10 paise. A sharp sell-off in domestic equities can be attributed to the fall. The dollar found support Wednesday on quarter-end demand along with safe-haven demand from the spread of the dangerous Delta COVID-19 variant throughout the world. The dollar extended its gains on Wednesday on mostly better-than-expected US economic data,” noted analysts at ICICI Direct.
It is worth noting that sustained foreign fund outflows, higher oil prices, and firm U.S. dollar will continue to weigh on the domestic unit.
The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.02% lower at 92.422 – not from a two-and-a-half-month top of 92.451 reached on Wednesday.
“After being a USD bear in recent years, we now see USD strengthening gradually into 2022 as FED starts tapering, lifting the Dollar Index (DXY) higher above 93,” noted analysts at UOB.
The dollar is expected to rise over the coming year, largely driven by the Fed’s dot plot released last week, which suggested an expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected weighed on the rupee.
Mitul Kotecha, Senior EM Strategist at TD Securities said in an interview with CNBC that the USD to INR pair could be around Rs 75 per dollar.
The benchmark equity indices the BSE Sensex was down 12 points or 0.2% at 52475.84, and the Nifty was up 4.5 points or 0.03% at 15725.55.
However, foreign institutional investors were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 1,646.66 crore, as per exchange data. Global oil benchmark Brent futures rose 0.16% to $74.74 per barrel.
This article was originally posted on FX Empire
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