The rupee fell 30 paise to close at 94.63 against the US dollar on Monday amid uncertainty over the US currency’s strength overseas and developments in the Middle East.Forex traders said the domestic currency witnessed volatile trading during the session as supportive credit and deposit inflows were balanced by a stronger dollar and lack of clarity on a long-term peace deal in the Middle East.In the interbank foreign exchange market, the rupee opened at 94.42 against the dollar, which is 9 paise lower than Friday’s 94.33.During the day, it moved between 94.24 and 94.76 before settling at 94.63.
Rupee under pressure due to strong dollar and importer demand
The dollar index, which measures the US currency against six major currencies, was trading 0.03 percent higher at 100.88, supported by the US Federal Reserve’s dovish stance and uncertainty around the US-Iran diplomatic process.Global oil benchmark Brent crude fell 1.75 per cent to $79.16 per barrel in futures trade, providing some support to the rupee.According to Dilip Parmar, research analyst at HDFC Securities, low crude oil prices, a relatively stable dollar and positive risk sentiment were not enough to support the Indian currency.“Despite the favorable backdrop of lower crude oil prices, stable greenback and positive risk-sentiment, the rupee faced pressure due to increased demand for the US dollar due to bargain hunting by traders and importers,” Parmar was quoted as saying by news agency PTI.He said spot USD-INR is expected to take support around 94.10, while immediate resistance is seen at 95.30.
Equity gains fail to support the currency
Domestic stock markets closed with gains on Monday, with Sensex rising 291.17 points at 77,094.07 and Nifty rising 89.80 points at 24,102.90.However, foreign institutional investors became net sellers and sold equities worth Rs 635.91 crore during the session, according to exchange data.On the macroeconomic front, government data showed growth in India’s eight core infrastructure sectors slowed to a seven-month low of 0.5 per cent in May compared with 1.8 per cent in April due to weak output of coal, crude oil and refinery products.
reserve Bank of India Be active in the foreign exchange market
According to the RBI’s monthly bulletin, the central bank made net sales of $8.944 billion in the spot foreign exchange market in April, after net sales of $9.758 billion in March.The bulletin said the rupee remained under pressure during April and May due to geopolitical tensions and foreign portfolio outflows, but recovered in June due to capital inflow measures, easing tensions and lower crude oil prices.According to RBI data, despite Monday’s fall, the rupee has strengthened by 0.2 per cent against the dollar till June 19 in the current financial year.Market participants also monitored developments in Switzerland, where US-Iran talks concluded with an agreement to launch a 60-day diplomatic process aimed at reaching a permanent solution to the conflict.However, concerns remained after Iran reiterated that it had closed the Strait of Hormuz, while the US said shipping traffic through the key energy corridor would continue.
