Mumbai, Oct 3 (PTI) Rupee depreciated 14 paise to settle at 83.96 against the US dollar on Thursday, as volatile geopolitical situation triggered a surge in crude oil prices and dragged down by a steep fall of over two per cent in domestic equity markets.
According to forex traders, a strong American currency and unabated outflow of foreign funds fuelled by the bullish Chinese markets also accelerated the rupee’s slide.
At the interbank foreign exchange, the local unit opened at 83.91 and touched a low of 84.00 against the greenback during intra-day trade. The unit ended the session at 83.96 against the American currency, registering a loss of 14 paise from its previous closing level.
On Tuesday, the rupee settled 3 paise lower at 83.82 against the American currency. Forex markets were closed on Wednesday on account of Mahatma Gandhi Jayanti.
According to Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, the rupee declined on weak domestic markets and a strong dollar, while a surge in crude oil prices also weighed on the domestic unit.
Choudhary said the rupee is expected to trade with a slight negative bias on risk aversion in the global markets and a strong dollar amid escalating tensions between Israel and Iran.
“Traders may take cues from ISM services PMI, weekly unemployment claims and factory orders data from the US. Investors may watch out for non-farm payrolls report from the US on Friday. USD-INR spot price is expected to trade in a range of Rs 83.75 to Rs 84.20,” he added.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.27 per cent to 101.95.
Brent crude, the international benchmark, climbed 3.59 per cent to USD 76.55 in futures trade.
Experts attributed the spike in crude prices to fear of Israel’s retaliatory attacks on Iran’s oil installations amid escalating tension in the Middle East.
Rupee depreciated against the US dollar in spot trade due to pressure seen from rising crude oil prices amid negative sentiment in the domestic equity markets with escalating concerns over tension in the Middle East, said Maneesh Sharma, AVP – Commodities & Currencies, Anand Rathi Shares and Stock Brokers.
Sharma further noted that unabated outflow of foreign funds from capital markets combined with a strengthening American currency weighed on the Indian currency.
“… The likelihood that rupee may get past 84 mark in coming days remains limited amid Indian Central bank could intervene around the same levels to prevent it from witnessing another all time lows in coming days,” Sharma said.
On the domestic equity market front, the Sensex crashed 1,769.19 points, or 2.10 per cent, to settle at 82,497.10, while the Nifty tanked 546.80 points, or 2.12 per cent to close the session at 25,250.10.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Thursday, offloading shares worth Rs 15,243.27 crore on a net basis in the cash segment, according to exchange data. FIIs have sold shares worth over Rs 30,000 crore since Monday.
Analysts said foreign investors rushed to sell Indian equities as Chinese stocks turned bullish after the country announced a slew of stimulus measures to revive the economy. PTI HVA DRR
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