Rupee Weakens 17 Paise To 90.11 Against US Dollar; Why?

The rupee weakened further on Thursday, slipping 17 paise to 90.11 against the US dollar in early trade, pressured by risk-off sentiment and elevated dollar demand from importers. Traders said the local

currency is likely to maintain a negative bias amid muted domestic markets and continued foreign fund outflows.

The rupee opened slightly stronger at 89.95 at the interbank foreign exchange but quickly gave up gains and dropped to 90.11, compared with Wednesday’s close of 89.87.

Investors are also awaiting fresh signals from the ongoing US–India trade talks, which could offer near-term support to the currency if progress is seen.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said the US negotiating team has indicated optimism about India’s proposals. “”The US-trade team has said that they have got the best proposal from India which could show up as positive for the rupee, though overall we may see it crumble under the short positions once the trade deal is finalised,” he said.

US Trade Representative Jamieson Greer told a Senate Appropriations Subcommittee that Washington has received its “best” ever offers from India as the two nations push to conclude the first phase of the Bilateral Trade Agreement (BTA). He also noted India’s resistance to imports of certain US row crops, including corn, soybeans, wheat and cotton.

Bhansali expects the USD/INR range to hold between 89.70 and 90.20 for the day, with foreign portfolio investors remaining net sellers.

Meanwhile, the dollar index eased 0.15% to 98.63 after the US Federal Reserve delivered a rate cut accompanied by a relatively softer policy stance. Global oil prices were marginally higher, with Brent crude up 0.22% at USD 62.35 per barrel in futures trade.

Domestic equities opened mixed but firmed up slightly, with the Sensex trading 80.15 points higher at 84,471.42, while the Nifty advanced 34.40 points to 25,792.40.

On Wednesday, Foreign Institutional Investors sold equities worth Rs 1,651.06 crore, exchange data showed.