Declining for the third straight session and recording its weakest level in over two months, the rupee fell 23 paise against the US dollar on Thursday, July 1, to settle at 74.55 (provisional) amid broader American currency and muted trend in domestic equities. At the interbank foreign exchange market, the domestic unit opened on a negative note at 74.37 against the dollar and hovered in the range of 74.34 to 74.63 during the session. In an early trade session, the local unit weakened by five paise to 74.37 against the greenback. In the last three trading sessions to Thursday, the domestic currency has lost 36 paise. (Also Read: Rupee Registers Biggest Monthly Fall In 15 Months )
Rupee Records Weakest Level In Over 2 Months
In the afternoon trade today, the domestic unit weakened to its lowest level since late April. Factors such as the broader strength of the greenback ahead of the U.S. jobs data, combined with weak domestic equities hurt the currency’s performance. During the session, the partially convertible rupee fell sharply to 74.63 – its lowest mark since April 27.
According to traders, the demand for the American currency from the foreign banks continued, however, the unit is also expected to trade with a weakening bias on concerns over the earlier-than-expected unwinding of economic stimulus by the U.S. Federal Reserve.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, increased 0.04 per cent to 92.47.
What analysts say on the rupee’s performance today:
Mr Amit Pabari, MD, CR Forex:
”Yesterday, the US dollar rose to a two-and-a-half-month high, posted its biggest monthly rise since November 2016 on hawkish fed and upbeat US economic data. The stronger than expected private payroll and home prices at a three-decade high is helping short-term rates like 2 & 5 years the US yields to jump more than 10 to 30-year yields.
The RBI is piling up its FX reserves even at the current levels and hence we are not seeing any appreciating move beyond 74 mark. Broadly, it has become really important to understand RBI’s stance as rupee will move in line with the RBI’s position. The return of the COVID variant, higher crude oil prices and expectation of a higher fiscal deficit will try to break the roof of 74.40-50 levels. If this level is taken out then one can expect an immediate move towards 75-75.20 levels.”
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:
”The US dollar index is trading at the highest level since early April and Asian currencies are under pressure. After a stronger than expected US ADP jobs report and robust housing sector data, hopes are high that coming Friday will see the US report a stellar set of employment numbers (NFP). I expect USDINR to trade within a range of 74.10 and 74.80 over the near term.”
Domestic equity markets today:
On the domestic equity market front, the BSE Sensex ended 164.11 points or 0.31 per cent lower at 52,318.60, while the broader NSE Nifty slipped 41.50 points or 0.26 per cent to close at 15,680. Due to weakness in HDFC Bank, Infosys, HDFC, Reliance Industries, the equity benchmarks traded lower for the second straight day. Auto stocks such as Tata Motors, Bajaj Auto, Maruti Suzuki registered gains after the firms announced their auto sales numbers for June 2021.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities
”The Nifty remained sluggish throughout the day and gradually declined to the level of 15667. Thursday’s fall was led by the decline in technology, banks and commodities, which have a large weight in the index. Volatility is declining, which is a sign that bulls are resting and they could bring volatility to the market.
India VIX closed at 12.63, the lowest level in the last 18 months. On a monthly basis, the market remained in the narrow range of 500 points, which is an unusual and even narrow trading range over the last six months. Long traders need to be careful when adding long positions at high levels and such markets invite unpleasant events.”
Meanwhile, according to exchange data, the foreign institutional investors were net sellers in the capital market on June 30 as they offloaded shares worth Rs 1,646.66 crore. Brent crude futures, the global oil benchmark, rose 0.96 per cent to $ 75.34 per barrel.