Mumbai, Oct 7 (PTI) The rupee pared its initial gains and settled for the day 1 paisa lower at 84.00 against the US dollar on Monday on selling pressure from foreign funds and weak tone in the domestic markets.
Forex traders said elevated crude oil prices and escalating tensions between Israel and Iran weighed on the local unit, while all-time high forex reserves boosted investor sentiments.
At the interbank foreign exchange, the rupee opened at 83.96 against the US dollar and touched an intra-day high of 83.95 and finally ended the day at 84.00.
On Friday, the rupee depreciated 3 paise to settle at 83.99 against the US dollar.
“We expect the rupee to trade with a negative bias on selling pressure from foreign funds and weak tone in the domestic markets. Escalating tensions between Israel and Iran may further pressurise the rupee,” said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
Choudhary said traders may take cues from comments by the US Fed officials.
“Investors may remain cautious ahead of the RBI’s monetary policy meeting outcome on Wednesday,” he said, adding that USDINR spot price is expected to trade in a range of Rs 83.80-84.20.
The reconstituted rate-setting panel of the Reserve Bank on Monday started deliberations on the next bi-monthly monetary policy.
In the current context, experts feel that the RBI may not follow the US Federal Reserve, which lowered the benchmark rates by 50 basis points, and the central banks of some developed nations, which have reduced the interest rates.
Meanwhile, India’s forex reserves jumped USD 12.588 billion to a new all-time high of USD 704.885 billion for the week ended September 27, the Reserve Bank of India (RBI) said on Friday.
According to Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, crude oil prices were relatively soft during the market opening, which initially lent some strength to the rupee. However, weak Indian equity markets largely driven by foreign fund outflows weighed on the local unit.
Foreign institutional investors (FIIs) are withdrawing funds due to rising tensions in the Middle East and a shift in investment focus towards China, perceived as a more attractive market, traders said.
“This FII outflow has contributed to sustained pressure on the rupee, keeping it weak against the dollar and close to all-time low levels,” Trivedi said, adding that the broader trend continues to reflect cautious sentiment, with geopolitical factors and global market shifts dictating the rupee’s movement. Rupee volatile range is seen between 83.70-84.25.
On the domestic equity market front, the Sensex fell 638.45 points, or 0.78 per cent, to close at 81,050.00. The Nifty declined 218.85 points, or 0.87 per cent to settle at 24,795.75. Both indices suffered losses in the previous week.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was down 0.02 per cent to 102.49.
Brent crude, the international benchmark, advanced 1.63 per cent to USD 79.32 in futures trade.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Monday, offloading shares worth Rs 8,293.41 crore on a net basis in the cash segment, according to exchange data. PTI TRB DRR
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