Rupee falls 6 paise to 83.54 against US Dollar in early trade

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The Indian rupee fell 6 paise to 83.54 against the US dollar in early trade on Thursday, driven by the US currency's strength in global markets and rising crude oil prices.

Forex traders remarked that the rupee was also under pressure due to weak domestic macroeconomic indicators. At the interbank foreign currency market, the rupee began at 83.52 and fell to 83.54 against the dollar, a 6-paise reduction from its previous closing level. On Wednesday, the rupee rose 11 paise to settle at 83.48 against the US dollar.

The dollar index, which measures the US dollar's strength against six major currencies, rose 0.14 per cent to 104.78. Meanwhile, Brent crude futures, the global oil benchmark, lost 0.34 per cent to USD 82.32 per barrel.

According to Amit Pabari, MD of CR Forex Advisors, the declining US CPI, combined with the Federal Reserve's expected rate cuts in 2024 and strong economic fundamentals in India, could lead to negative sentiment for the dollar, pushing the dollar index to 103.50 and appreciating the rupee. Additionally, the Reserve Bank of India (RBI), with USD 651 billion in reserves, is expected to act to prevent substantial currency devaluation. Pabari expected the rupee to move between 82.90 and 83.70.

"Given these factors, the rupee is forecasted to oscillate within a range of 82.90 to 83.70," Pabari added.

On the domestic front, India's industrial production growth dipped to a three-month low of 5 per cent in April 2024, owing to poor performance in the manufacturing sector, despite good output in the mining and power sectors.

Meanwhile, retail inflation fell to a one-year low of 4.75 per cent in May, owing to a small drop in food costs, remaining below the RBI's target of 6 per cent.

In early trade, the BSE Sensex surged 306.75 points, or 0.40 per cent, to 76,913.32, while the NSE Nifty gained 115.30 points, or 0.49 per cent, to 23,438.25 points. In Asian markets, Seoul and Hong Kong were trading higher, while Tokyo and Shanghai were lower. US markets closed mostly with gains.

Foreign institutional investors (FIIs) were net purchasers on Wednesday, buying shares worth Rs 426.63 crore, according to exchange data.