Rupee Falls For The Second Straight Session As Dollar Reigns Supreme

The rupee fell for the second straight session, tracking a decline in equities ahead of inflation data abroad and at home.

Rupee Falls For The Second Straight Session As Dollar Reigns Supreme

Rupee wobbles on firm dollar as markets wary before key US and India inflation data

The rupee fell for the second straight session on Tuesday, tracking a stronger dollar and a decline in equities ahead of inflation data from the US and at home as investors wait to see the impact of the Russia-Ukraine war on domestic price pressures.

Reuters quoted the rupee at 76.10 against the dollar on Tuesday from the previous close of 75.94, and the PTI reported the currency closed provisionally at 
76.14 per dollar.

The weakness was primarily driven by the dollar reigning supreme on expectations that data would show US inflation jumped the most in 16 years leading to an even more aggressive Federal Reserve rate hike path, including faster quantitative tightening.

Those expectations for faster and more significant Fed rate hikes pushed up the dollar index, which measures the greenback's strength against the six most-traded currencies, back above 100 on Tuesday.

What has not helped the rupee are expectations that India's retail inflation likely edged up even further above the Reserve Bank of India's upper end of the 2-6 per cent target band.

While the RBI reluctantly changed its policy stance and said that its focus has now shifted toward inflation away from growth, it is likely to be well behind the US central bank, widening the interest rate differentials and hurting the rupee further.

Indian equity benchmarks extended their fall for the second straight session on Tuesday, dragged by metal and information technology (IT) stocks as market participants awaited the retail inflation data for last month.

The latest stock exchange data showed foreign institutional investors (FIIs) offloaded Indian shares worth Rs 1,145.24 crore on Monday. 

"(The stock) market is under pressure on account of inflation worries ahead of US inflation data release. Even (India's) March CPI inflation is set to increase to 6.37 per cent from 6.07 per cent in February," said Rahul Sharma, C0-Founder of Equity 99.

Along with this, the RBI's hawkish turn at its policy review on April 8. Few sectors expected to adversely affect their quarterly results due to commodity price rise and inflation have put added pressure on the market," he added.

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