USD/INR: Rupee Opens Marginally Lower; May Lose Further

The Indian rupee opened on a weaker note, depreciating by over 5 paise against the US dollar in early morning trade Wednesday as oil prices rose for the second straight day and the greenback continued to hover below a two-month high against its rivals.

The dollar to rupee conversion today rose to 74.2725 against the U.S. currency, up from Tuesday’s close of 74.22. The rupee has lost over 165 paise so far this month and weakened over 7 paise in the last three trading sessions. It is worth noting that sustained foreign fund outflows, higher oil prices, and firm U.S. dollar will continue to weigh on the domestic unit.

“The rupee has been trading in a tight range for a couple of sessions. Yesterday, the rupee depreciated by 3 paise against the dollar as weakness in domestic equities continued for a second day,” noted analysts at ICICI Direct.

“The dollar index witnessed safe-haven buying as more countries are expected to impose fresh lockdown post spread in the Delta virus. The dollar index is likely to move towards 92.5 levels in coming weeks.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.1% higher at 91.005 – not from a two-month high of 92.408.

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. That would push the USD to INR pair further up.

A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected weighed on the yellow metal. Gold prices fell about 0.14% to $1,758.56.

The benchmark equity indices the BSE Sensex was up 219 points or 0.42% at 52764.82, and the Nifty was up 61.65 points or 0.40% at 15813.40.

However, foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth Rs 116.63 crore, as per exchange data.

Global oil benchmark Brent futures rose 0.41% to $75.07 per barrel an industry report showed U.S. crude stockpiles declined last week.