The Indian rupee opened on a flat note and edged higher by 1.25 paise to 72.14 against the US dollar in early morning trade today amid volatility seen in the domestic equity market.
Indian Rupee Opens Flat
The Indian rupee fell to 72.14 against the U.S. currency, down from Thursday’s close of 74.16. It is worth noting that the rupee has lost over 150 paise so far this month and weakened about 30 paise in the last five trading sessions.
“The Indian rupee depreciated sharply last week hurt by the US Federal Reserve’s hawkish surprise while a correction in domestic equities also supported the pair. The dollar index was headed for its best week in nearly nine months, with rival currencies struggling to shake the pressure exerted by the Federal Reserve’s sudden hawkish shift in tone,” noted analysts at ICICI Direct.
“The shakeout on foreign exchanges has been triggered by Fed forecasts, or ‘dot plots,’ showing 13 of the 18-person policy board saw rates rising in 2023, vs. only six previously, with the median board member tipping two hikes in 2023. Therefore, we expect depreciation in the rupee to continue towards 75.00 level as a rebound in the dollar index is likely to support the pair in the near term.”
The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.05% lower at 91.77. 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.
Indian Rupee Opens Flat
“US Dollar is expected to trade with a positive bias amid a decline in stock markets and expectation of improved economic data from the US. Further, US Federal Reserve last week surprised the market by signaling a rate hike and ending emergency bond-buying sooner than expected as the economy recovers rapidly from the effects of the pandemic. Furthermore, Dollar may gain strength on divergence in global monetary policies,” noted analysts at Sharekhan by BNP Paribas.
“Moreover, traders will remain vigilant ahead of negotiations over infrastructure spending and US Federal Reserve Chairman Powell testimony. Any hawkish statement from Fed officials will continue to support Dollar. Additionally, a rapid vaccination programme will lead to economic reopening. 149.6 million people or 45.1% of US population have been fully vaccinated and 177.08 million people or 53.3% of the population have received at least 1 dose.”
The Indian equity market witnessed a strong influx of retail investors, the benchmark equity indices BSE Sensex was down 69.08 points or 0.13% at 52629.92, and the Nifty was down 14.90 points or 0.09% at 15775.60. However, foreign institutional investors were net buyers in the capital market on Wednesday as they purchased shares worth Rs 3,156.53 crore, as per exchange data. Global oil benchmark Brent futures rose 0.07% to $75.61 per barrel.