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The Indian rupee experienced a modest range-bound trade in the early hours of Monday, gaining a slight 1 paisa to reach 84.07 against the US dollar. This cautious appreciation came amidst substantial foreign fund outflows and the ongoing strength of the US currency in the global market.
Forex traders noted that the rupee is likely to remain within a narrow range throughout the day. While the robust performance of the dollar poses challenges for the local currency, positive movements in domestic equities, along with declining crude oil prices, could offer some support. Additionally, any intervention by the Reserve Bank of India (RBI) may help bolster the rupee at lower levels.
At the interbank foreign exchange, the rupee opened slightly lower at 84.08 against the dollar. However, in early trading, it improved to 84.07, marking a marginal increase from its previous close. On Friday, the rupee settled down by just 1 paisa, hovering near an all-time low at 84.08.
Traders highlighted that the rupee had previously hit its lowest closing level of 84.10 against the dollar on October 11. Despite this, the dollar index, which measures the dollar's strength against a basket of six currencies, traded 0.28 per cent lower at 104.54, indicating a mixed performance in the dollar's value.
Adding to the market dynamics, Brent crude, the global oil benchmark, eased by 4.39 per cent to USD 72.71 per barrel in futures trade. Traders suggest that the rupee remains under pressure, primarily due to ongoing foreign fund outflows.
According to Amit Pabari, Managing Director of CR Forex Advisors, the rupee is expected to hover around the 84 mark for the foreseeable future, influenced by the stronger dollar index throughout October. He noted that with a lighter data schedule and the upcoming Diwali festivities, trading volumes are likely to remain subdued this week. However, pressure on the rupee is anticipated to continue until foreign institutional investor (FII) outflows ease, partly driven by high valuations in Indian equities.
The USD-INR pair is projected to trade within a narrow range of 83.80 to 84.20, with downside support from the RBI's reserves, according to Pabari.
On the domestic equity front, the Sensex rose by 209.10 points, or 0.26 per cent, reaching 79,611.39 points, while the Nifty increased by 13.55 points, or 0.06 per cent, to settle at 24,194.35 points.
In a concerning trend, foreign institutional investors were net sellers in the capital markets on Friday, offloading shares worth Rs 3,036.75 crore, as per exchange data. Meanwhile, India's foreign exchange reserves fell by USD 2.163 billion to USD 688.267 billion for the week ending October 18, according to RBI reports. This drop follows a previous week where the reserves had plummeted by USD 10.746 billion, marking one of the largest declines in recent times.
Overall, the market remains watchful, with traders keenly observing both global cues and domestic developments that may impact the rupee's trajectory.
(With inputs from PTI)
