The weakness in the rupee continues on the back of a stregthening dollar and selling by foreign investors. The currency felll further and closed at a new closing low of 84.40 against the US dollar.
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Trading Range and RBI Intervention
The rupee fluctuated between a high of 84.38 and a low of 84.41 during the session before settling at 84.40. Market experts expect the rupee to trade within the 83.80 to 84.50 range in the medium term. The Reserve Bank of India (RBI) is expected to intervene and limit further decline.
Jateen Trivedi, VP Research Analyst for Commodity and Currency at LKP Securities, said, “the rupee received some relief from falling crude and gold prices, as the reduced pace of decline could potentially improve India’s import bill in the coming months. Despite this, the dollar index’s continued strength above 105 is expected to maintain pressure on the rupee, limiting any significant recovery in the near term. With resistance near 84.25-84.30 zone and support seen lower at 84.55. This week’s focus will be on the US CPI data release, which could influence the dollar’s trajectory. Additionally, Chairperson Powell’s upcoming speech is expected to provide insights that may drive price action in the dollar, currently trading at a four-month high of 105.75$”
Impact of Global Factors
The US dollar index, which measures the strength of the greenback against a basket of six major currencies, was trading 0.06% higher at 105.60. The dollar index has maintained strength above 105, exerting continued pressure on the rupee. Brent crude, the global oil benchmark, also saw a 0.60% increase, trading at USD 72.26 per barrel in futures.
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The upcoming US Consumer Price Index (CPI) dataand a speech by US Federal Reserve Chair Jerome Powell will have a telling impact on the dollar and investor sentiment at large. The dollar index currently trading at a four-month high of 105.75 and depending on this trajectory, the Indian currency is likely to see further action.
FIIs on a selling spree impacting sentiment
The decline in the rupee comes amid a significant drop in domestic equity markets coupledwith continuous outflows by foreign institutional investors (FIIs).
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