The Indian rupee traded in a tight range on Tuesday before settling 6 paise lower at 90.95 against the US dollar, weighed down by a stronger greenback, rising crude oil prices, and weakness in domestic equity markets.
The local currency had closed at 90.89 on Monday after gaining 5 paise in the previous session.
Narrow Trading Band Amid Possible RBI Intervention
At the interbank foreign exchange market, the rupee opened at 90.91 and moved within a narrow band of 90.91 to 90.97 during the day. It finally ended the session at 90.95, down 6 paise from its previous close.Forex traders indicated that the limited movement suggested possible intervention by the Reserve Bank of India to prevent excessive volatility. The rupee hovered near the psychological 91 mark during the session.
Market participants said the central bank may have sold dollars to keep the currency from breaching the 91 level.
Weak Domestic Equities and Trade Uncertainty Weigh on Rupee
The rupee came under pressure amid a sharp sell-off in domestic equity markets and uncertainty surrounding the proposed India US trade deal.On the equity front, the Sensex declined 1,068.74 points to close at 82,225.92, while the Nifty fell 288.35 points to 25,424.65.
Foreign institutional investors also turned net sellers, offloading equities worth Rs 102.53 crore during the session, according to exchange data.
Firm Dollar and Higher Crude Add to Pressure
The dollar index, which measures the US dollar’s strength against a basket of six currencies, was trading 0.16 percent higher at 97.86, adding to the pressure on emerging market currencies including the rupee.Meanwhile, Brent crude futures rose 0.27 percent to USD 71.68 per barrel. Higher crude oil prices typically widen India’s trade deficit and increase dollar demand, thereby exerting pressure on the rupee.
Rupee Outlook
Market participants expect the rupee spot price to trade in a range of 90.75 to 91.20 on Wednesday, with movements likely to be influenced by global currency trends, crude oil prices, and developments around the India US trade deal.Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
The information provided is for general informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Readers are advised to rely on their own assessment and judgment and consult appropriate financial advisers, if required, before taking any investment-related decisions.