The rupee saw a modest retreat on Monday, edging down 10 paise to conclude the trading session at 83.48 against the U.S. dollar, provisional figures indicate. This slight dip came as market participants maintained a careful stance with the upcoming U.S. Federal Reserve’s monetary policy decision in view.
Market analysts observed that despite the slide, the Indian currency was offered some support by positive movements in the domestic equity market and the easing of crude oil prices on the global stage. These factors helped to mitigate what could have been a steeper decline in value.
During the day’s exchange at the interbank foreign exchange market, the domestic unit opened with a weakening bias at 83.39 and experienced fluctuations that included an intra-day nadir of 83.51 against the U.S. dollar, before finally settling at the slightly weaker closing mark of 83.48. This result extends the previous session’s trend, where the rupee also saw a 10 paise decrease in value to end at 83.38 against the dollar.
Meanwhile, the dollar index, a measure of the U.S. currency against a basket of its global counterparts, revealed a 0.26% depreciation, landing at 105.53. This downward movement was predominantly driven by the markets’ cautious sentiment in anticipation of key monetary policy decisions by the U.S. Federal Reserve, and the release of vital economic data points both domestically and internationally in the coming week.
Investors and traders are particularly keyed in on the Federal Open Market Committee (FOMC) meeting slated to start on Tuesday, with the interest rate decision expected to be communicated at the month’s end.
Reflecting on the rupee’s performance, Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, noted that the Indian currency faced downward pressure due to the positive trajectory of the U.S. dollar in early trading hours and ongoing foreign institutional investor (FII) outflows. Nevertheless, he acknowledged the buoyancy provided by a favorable stock market and lower crude oil prices, offering a buffer against the fall.
Choudhary projected that the rupee might trade with a subtle negative bias on the back of selling pressure from foreign investors and the anticipation of a potential rebound in crude oil prices. Despite these pressures, he suggests that improved global risk attitudes and subdued geopolitical tensions in the Middle East are likely to undergird the rupee at lower levels. The USD-INR spot price is expected to oscillate within the range of ₹83.20 to ₹83.70.
From a different angle, Brent crude futures, the international oil benchmark, showed a 0.53% setback, costing $89.03 per barrel. Mohammed Imran, also a Research Analyst at Sharekhan by BNP Paribas, commented on the challenges crude oil demand might encounter from the U.S. due to resurging concerns over inflation. Conversely, he posited that geopolitical risks appear to have diminished significantly, thus alleviating some of the previously added risk premiums in the market price.
On the domestic front, equities experienced a significant surge; the BSE Sensex closed up 941.12 points (a 1.28% boost), settling at 74,671.28, while the broader NSE Nifty jumped 223.45 points, an increase of 1.00%, to close at 22,643.40.
Despite equities’ strong performance, FIIs continued to be net sellers in the capital markets as of the last recorded session, divesting shares amounting to ₹3,408.88 crore, according to the data from the stock exchange.
Finally, the Reserve Bank of India’s recent statistics revealed that India’s foreign exchange reserves have seen a contraction. The reserves have diminished by a substantive $2.282 billion in the week ending April 19, marking the second consecutive week of decline, leaving the total at $640.334 billion.
In conclusion, while domestic and international factors provided some support, the Indian rupee witnessed a slight setback as market players exhibit caution in anticipation of pivotal financial events on the horizon. The interplay of equity market performance, crude oil price trends, and external investor behavior continues to influence the rupee’s trajectory.
