MUMBAI: The rupee depreciated by 4 paise to close at 82.79 against the US currency on Monday as a stronger dollar in the overseas market and forex outflows from capital markets weighed on the local unit.
Month-end dollar demand from importers and losses in domestic equities also weakened the rupee sentiment.
At the interbank foreign exchange market, the rupee opened lower at 82.87 against the greenback and later slid further to a low of 82.94 in line with a decline in equity markets.
The rupee later pared losses as the US dollar retreated from the seven-week highs and stock markets cut losses. The local unit closed at 82.79, registering a fall of 4 paise over its previous close of 82.75.
Forex traders said that suspected intervention by the RBI might have prevented a sharp fall in the rupee.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading marginally lower at 105.15 after touching a seven-week high of 105.36.
Global oil benchmark Brent crude futures advanced 0.46 per cent to USD 83.54 per barrel.
The Indian rupee depreciated on weak domestic markets and a strong greenback. A surge in crude oil prices and FII outflows also weighed on the rupee, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
The dollar strengthened on concerns over higher interest rates for longer amid higher inflation and upbeat economic data from the US, Choudhary added.
“We expect the rupee to trade with a negative bias on risk aversion in global markets and positive greenback. Month-end dollar demand from importers may weigh on the rupee. However, any intervention by the Reserve Bank of India may prevent a sharp fall in Rupee,” Choudhary said.
According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, the rupee continued to trade in a narrow range and volatility remained low.
Positive US economic data and higher rate hike expectations supported an up-move in US bond yields and the dollar index, which surged to a seven-week high in early trade and was on course to end its four-month losing streak.
The focus will be on US Core Durable goods orders and pending home sales data.
“A higher number could extend gains for the dollar,” Somaiya said, adding that “we expect the USDINR(Spot) to trade sideways and quote in the range of 82.70 and 83.05.”
The 30-share BSE Sensex ended 175.58 points or 0.30 per cent lower at 59,288.35, while the broader NSE Nifty declined 73.10 points or 0.42 per cent to 17,392.70.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Monday as they offloaded shares worth Rs 2,022.52 crore, according to exchange data.
On the domestic macroeconomic front, India’s forex reserves dropped by USD 5.681 billion to USD 561.267 billion in the week ended February 17, the RBI said on Friday. (PTI)