A currency trader is pictured through the symbol for the Indian Rupee on the floor of a trading firm in Mumbai.
| Photo Credit: REUTERS

The rupee consolidated in a narrow range and settled for the day lower by 2 paise at 83.97 (provisional) against the American currency on Monday (August 12, 2024), as market participants remained on the sidelines ahead of the release of key domestic macroeconomic data.

Forex traders said the Indian rupee declined on a positive tone in the U.S. dollar and a surge in crude oil prices.

At the interbank foreign exchange market, the local unit opened at 83.95 and touched an intraday low of 83.98 and finally settled at 83.97 (provisional) against the American currency, lower by 2 paise from its previous close.

The local unit had slumped 37 paise to settle at an all-time low of 84.09 against the U.S. dollar on August 5. On Friday (August 9, 2024), the rupee settled for the day higher by 2 paise at 83.95 against U.S. dollar.

“We expect the rupee to trade with a slight negative bias on strength in the U.S. dollar and rising global crude oil prices. Selling pressure from foreign investors and geopolitical tensions in the Middle East may further pressurise the rupee,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

Forex traders said for the USD/INR pair 84.00 level is acting as a psychological resistance. Market participants are also awaiting cues from the Indian CPI inflation and IIP numbers scheduled to be released later in the day.

Moreover, investors may remain cautious ahead of U.S. CPI, retail sales and consumer confidence data from the US this week. “USD-INR spot price is expected to trade in a range of ₹83.75 to ₹84.25,” Choudhary added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.05% higher at 103.18.

Brent crude, the global oil benchmark, advanced 0.85% to $80.34 per barrel.

On the domestic equity market front, Sensex declined 56.99 points, or 0.07%, to 79,648.92 points. The Nifty fell 20.50 points, or 0.08%, to 24,347.00 points.

Foreign institutional investors (FIIs) were net buyers in the capital markets on Friday as they purchased shares worth ₹406.72 crore, according to exchange data.

Meanwhile, India’s forex reserves jumped by $7.533 billion to a new record high of $674.919 billion during the week ended August 2, the Reserve Bank said on Friday.

The rupee depreciated by 19 paise to settle at 82.85 (provisional) against the U.S. dollar on Friday amid weak sentiment in the equity markets and a strong dollar against major rivals overseas.

Foreign fund inflows and softening crude prices, however, supported the Indian currency even as investors were awaiting India’s industrial output number, to be released later in the day, said analysts.

At the interbank foreign exchange market, the local unit opened at 82.75 against the U.S. dollar. It touched the peak of 82.73 and hit the lowest level of 82.87 during intra-day trade before settling at 82.85 (provisional) against the greenback, 19 paise lower from its previous close.

“Indian rupee depreciated on a positive U.S. dollar and weak domestic markets. However, FII inflows and overnight decline in crude oil prices cushioned the downside,” Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.

On Thursday, the rupee rebounded 19 paise to close at 82.66 against the U.S. dollar after the RBI asked banks to set aside a larger part of incremental deposits under the cash reserve ratio (CRR) as part of measures to take out excess liquidity from the banking system.

The Reserve Bank of India in its bi-monthly monetary policy review also decided to keep key interest rate unchanged, but hinted at tighter policy if food prices drive inflation higher.

In the overseas currency market, the dollar strengthened after U.S. consumer price inflation showed moderation in July, raising hopes that the U.S. Federal Reserve would pause rate hike.

Mr. Choudhary said the rupee is expected to trade with a “negative bias on risk aversion in global markets and elevated crude oil prices. However, fresh inflows by FIIs may support Rupee at lower levels”.

“Traders may take cues from India’s industrial production and U.S. PPI and consumer sentiment data. We expect the USDINR spot to trade in the range of 82.40 to 83.30 in the near term,” he added.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.11% to 102.64.

Global oil benchmark Brent crude was trading 0.19% lower at $86.24 per barrel.

On the domestic equity market front, the 30-share BSE Sensex closed 365.53 points or 0.56% lower at 65,322.65. The broader NSE Nifty fell 114.80 points or 0.59% to 19,428.30.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday as they purchased shares worth ₹331.22 crore, according to exchange data.