Mumbai, Oct 05: Rupee traded in a narrow range against the US dollar in early trade on Monday and is hovering around the crucial 96 mark, amid persistent pressure from elevated crude oil prices and sustained foreign fund outflows.
Forex traders said periodic dollar interventions by the Reserve Bank of India (RBI) helped smooth excessive intraday volatility and capped sharper losses for the rupee, the overall macro environment of elevated import bills and persistent greenback strength weighed on investor sentiment.
At the interbank foreign exchange market, the rupee opened at 96.20, then fell to 96.26 against the US dollar, registering a fall of 1 paisa from its previous close.
On Thursday, the rupee slumped below the psychologically important 96 per dollar mark to close at 96.25 against the US dollar. Forex and equity markets were closed on Friday on account of Mahatma Gandhi Jayanti.
“The rupee closed at its weakest in over two months, and carries an upward bias for the pair within 95.50–96.50 on oil above USD 100, US yields at multi-year highs and heavy foreign portfolio selling,” said Anindya Banerjee, Head of Commodity and Currency Research, Kotak Securities.
The Reserve Bank has been active — the USD 18 billion fall in reserves to USD 748 billion reflects the scale of that defence — and the monetary policy committee meets this week with most economists expecting a 25 basis point increase to 5.50 per cent.
The triggers for the USD/INR pair are US services data, the Fed minutes and the RBI decision on Wednesday, and any Saudi confirmation of weekend damage. A Fed on hold in October and an RBI hike are priced; confirmed damage to Saudi infrastructure is not, and would move Brent towards the top of its range quickly, Banerjee added.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 102.47, higher by 0.54 per cent.
Brent crude, the global oil benchmark, was trading lower by 0.89 per cent at USD 101.34 per barrel in futures trade.
“Though we wait for RBI action on rupee, as dollar buying by oil companies will continue while FPIs will continue to remain in sell mode…,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP.
On the domestic equity market front, Sensex rose 413 points to 72,315 in early trade, while the Nifty was trading 131.55 points higher at 22,554.20.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 9,484.22 crore on a net basis on Thursday, according to exchange data.
Meanwhile, India’s forex reserves dropped USD 18.343 billion to USD 747.557 billion during the week ended September 25, the Reserve Bank said on Friday. In the previous reporting week, the kitty had declined USD 14.881 billion to USD 765.901 billion. ( PTI )
