Rupee weakens against dollar and approaches level 76


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NEW DELHI: The rupee fell against the US dollar on Tuesday as the global strength of the greenback and weakness in domestic stocks soured sentiment for the Indian currency, brokers said.

Traders also preferred to face existing bets on the rupee ahead of the Federal Reserve’s monetary policy statement on Wednesday, in which the US central bank is expected to take a hawkish stance, given the hardening inflation in the country.

The partially convertible rupee opened at 75.9450 to the US dollar on Tuesday against 75.7650 / $ 1 at the previous close. Risk aversion ahead of the crucial Fed statement dragged the rupee close to the $ 76/1 mark, with the currency moving so far in a range of 75.89 to 75.95 / 1 $.

The US dollar index, which measures the greenback against a basket of six major currency pairs, held firm at 96.43, significantly stronger than 96.05 at the end of last week.

The US currency gained on Fed expectations signaling a faster pace of bond cuts and interest rate hikes, given that inflation in the world’s largest economy is currently at an all-time high for almost four decades.

Higher US interest rates could lessen the attractiveness of riskier emerging market currencies such as the rupee and lead to capital outflows. In fact, since October, foreign portfolio investors have embarked on a vicious wave of selling Indian stocks, mainly due to domestic GDP growth lagging behind the United States, while a dollar stronger eats away at returns on local investments.

Renewed concerns about the global economic impact of the Omicron strain of the coronavirus have also prompted investors to move towards safer assets such as the U.S. dollar while reducing their exposure to emerging market currencies, dealers said.

Several countries in Europe and Asia have imposed activity restrictions to contain the rapid spread of the latest highly mutated strain of the virus.

Another global development unfavorable to the rupee, oil prices have hardened, although concerns over Omicron have set a cap on the price of the raw material.

Brent crude oil futures edged up 1 cent to $ 74.40 a barrel at 01:13 GMT, while US West Texas Intermediate (WTI) crude futures gained 1 cent to 71.30 $. Rising oil prices pose upside risks to Indian inflation and hurt India’s current account, as the country is the world’s third largest importer and consumer of this product.

“There is a certain risk; Omicron and US inflation are the key themes, traders are settling bets on the rupee even though it was expected to take a long time to hit $ 76/1, â€a dealer said. a public bank.

“We don’t expect a runaway depreciation beyond $ 76: 1 as the RBI has huge foreign exchange reserves and IPO flows will continue. But for today, it is a safe environment. Even the actions reflect that, â€he said.

At 9:31 am, BSE flagship Sensex was down 222 points or 0.38% to 58,062. The benchmark NSE Nifty fell 51 points or 0.29% to 17,318.

Government bonds remained stable, with the yield on the 10-year benchmark bond at 6.10% 2031 standing at 6.36%, one basis point lower than the previous close. The prices and yields of bonds move in the opposite direction.

The marginal rise in prices is due to a smaller than expected rise in inflation based on the Consumer Price Index, which stood at 4.91% in November against expectations of around 5.0 at 5.2%, dealers said.

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