On June 6, the rupee appreciated seven paise higher at 83.44 against the dollar. | Photo credit: The Hindu
The rupee depreciated five paise to touch 83.49 (provisional) against the US dollar on June 6 due to foreign capital outflow and rising oil prices abroad.
Forex traders said the frail US currency and sturdy stock market trend are supporting the local currency even as investors remain concerned about the RBI’s monetary policy decision, which is expected to be announced on June 7.
On the interbank foreign exchange market, the local unit opened at 83.40 and during the session touched the daily low of 83.50 against the dollar.
The local unit finally settled at 83.49 (provisional) against the US currency, down five paise from the previous close. The rupee strengthened seven paise higher to 83.44 against the dollar on Wednesday.
According to Anuj Choudhary, research analyst at Sharekhan at BNP Paribas, the rupee has depreciated due to the piercing rise in crude oil prices and selling pressure from FIIs (foreign institutional investors). However, a frail US dollar and positive tone in domestic markets supported the rupee at lower levels.
“We expect the rupee to trade with a slight negative bias on concerns over rising crude oil prices and as FIIs continue selling in the markets. However, the positive sentiment in domestic markets with the NDA expected to return to power for the third consecutive time increasing optimism on policy continuity may support the rupee at lower levels,” Choudhary said, adding that “the USD-INR spot price is expected to range from £83.20 to £83.80.”
Meanwhile, the dollar index, which measures the dollar’s strength against a basket of six currencies, fell 0.03% to 104.18. Analysts attributed the weakness in the dollar index to a piercing decline in U.S. Treasury yields after the latest data showed job growth in May was slower than estimated, raising expectations of an interest rate cut by the U.S. Federal Reserve.
“Market participants are likely to draw further conclusions from weekly employment and trade data due later in the day. Besides, the decision of the RBI interest rate panel is likely to impact investor sentiment,” they added.
The Monetary Policy Committee (MPC) of the RBI on Wednesday began its three-day deliberations to decide on the next monetary policy. Reserve Bank Governor Shaktikanta Das will declare the result on June 7.
“The Reserve Bank of India in its June 7 assessment will maintain the repo rate at 6.5%. “Policies become tighter as inflation declines causing real interest rates to rise, hurting growth,” said Amit Goel, co-founder and global chief strategist at Pace 360.
He further said that the record dividend payment of Rs 2.1 lakh crore by the RBI to the government for FY24 may ease concerns on the growth prospects. Brent crude futures, the global crude oil benchmark, rose 0.31% to $78.65 a barrel.
In the domestic equity market, the 30-share BSE Sensex rose 692.27 points or 0.93% to close at 75,074.51. The broader NSE Nifty index rose 201.05 points or 0.89% to 22,821.40.
Foreign investors were net sellers of Indian equities on Wednesday, withdrawing shares worth ₹ 5,656.26 crore on a net basis. FIIs bought shares worth ₹ 21,012.72 crore and sold shares worth ₹ 26,668.98 crore in the cash segment.