Continuing its winning streak for the fifth straight session, the rupee inched two paise higher against the US dollar on Friday, August 4, to settle at 74.15 (provisional) after the announcement of the RBI Governor Shaktikanata Das-led monetary policy statement. At the interbank foreign exchange market, the local unit opened at 74.11 and registered an intra-day high of 74.10. It witnessed a low of 74.22. In an early trade session, the domestic unit gained seven paise to 74.10 against the greenback. The rupee finally settled at 74.15, higher by two paise over its previous close.
On Thursday, August 5, the local unit settled at 74.17 against the American currency. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, climbed 0.18 per cent to 92.41. The rupee witnessed a winning streak throughout the week mostly on the back of a strong rally in domestic equities.
The Reserve Bank of India (RBI), in its bi-monthly monetary policy committee meeting, kept the benchmark interest rate unchanged at four per cent but maintained an accommodative stance as the economy is yet to recover from the impact of the second wave of COVID-19.
However, the central bank raised the retail inflation projection for the current fiscal to 5.7 per cent on account of the supply-side impediments, firm crude oil prices, as well as higher cost of raw materials.
What analysts say:
Mr Amit Pabari, MD, CR Forex:
''The US job report- releasing in the evening is expected to keep the attention intact. It is expected that US has added 870K job in July and the unemployment rate to further hit a low of 5.7 per cent. If they deliver the same, then we could see DXY hitting 92.65 to 92.80 levels. Overall, the impact of IPO flows could not help currency today as RBI policy could dominate over other factors.
For the short term, we are expecting that the USDINR pair should bottom out soon near 74.00-74.10 levels and recover back towards 74.40-50 levels. If that level is convincingly crossed, then 74.90-75.00 could be seen.''
Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:
''During early Thursday trading, the USD/INR rose to 74.23, up 0.05 percent intraday. During its three-day decline, the Indian rupee (INR) pair fell to its lowest level since June 22 before a recent corrective pullback. The USD/INR bears will be challenged by the safe-haven demand for the US currency and the Fed's tapering talk, not to mention the pre-data/events worry.
The US Dollar Index (DXY) is down the most this week as market participants await critical data amid the stimulus impasse. Fears of a covid outbreak prompted the US Centers for Disease Control and Prevention (CDC) to declare a temporary prohibition, which will expire on October 3, after the CDC noted the sharpest increase in cases in February.''
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 215.12 points or 0.39 per cent lower at 54,277.72, while the broader NSE Nifty slipped 56.40 points or 0.35 per cent to 16,238.20.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
“After rallying for four straight sessions and scaling new milestones, benchmark indices shed losses as investors booked profit in Reliance Industries and other select blue-chip stocks. The RBI's decision to keep the policy rates unchanged failed to woo investors as the status quo was already priced in the market.
Technically, on weekly charts, the Nifty has formed a strong breakout formation, which indicates a further uptrend from current levels. We are of the view that the medium-term trend is bullish and buying on dips and selling on rallies would be the ideal strategy for the positional traders.''
According to exchange data, the foreign institutional investors were net sellers in the capital market on August 5 as they offloaded shares worth Rs 719.88 crore. Brent crude futures, the global oil benchmark, rose 0.59 per cent to $ 71.71 per barrel.