The rupee erased its early gains and declined five paise against the US dollar on Tuesday, July 27, to settle at 74.47 (provisional) dragged by losses in domestic equities and amid a stronger American currency. At the interbank foreign exchange market, the domestic unit opened at 74.36 against the dollar and registered an intra-day high of 74.35 during the session. It witnessed a low of 74.54. In an early trade session, the local unit inched six paise higher to 74.36 against the greenback. It closed at 74.47, down five paise over its last close.
On Monday, July 26, the local unit settled at 74.42 against the American currency. According to forex traders, the domestic unit is trading in a narrow range as investors are awaiting cues from the US Fed's policy decision due on Wednesday and a month-end rebalancing.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.12 per cent to 92.76.
What analysts say:
Mr Amit Pabari, MD, CR Forex:
''The countdown to the Fed meeting has begun as FOMC members will resume their discussion on the policy from today and will announce the result tomorrow. The probability of members having the same view as the June meeting is approximately 60 per cent. And the probability of members turning more hawkish is 30 per cent and the rest 10 per cent is for the dovish stance.
The local currency- rupee has been into the consolidation phase of 74.30-75.00 zone. Moving ahead, it would be interesting to watch whether RBI again take charge and intervene heavily at current levels or allow it to appreciate towards 74.00-74.10 levels.
The chances of reversal from the current levels are high as the resurgence of COVID cases in Asia, higher inflationary pressure, and importer's rush to cover dollar exposure ahead of Fed and RBI meeting could take the pair again towards 74.90-75.00 levels.''
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:
“USDINR is once again stuck in a narrow and listless range with spot USDINR closing just 4 paise higher 74.46. July futures is trading four paise higher at 74.48. A sharp drop in Chinese currency triggered a depreciation in rupee. However, the gains in USDINR were limited as corporate flows capped the upside. Over the near term we expect a range of 74.30-74.60.”
Mr. Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors:
''Rupee opened stronger at 74.3650 as dollar index fell slightly. The rupee remained in a range of 20 paise weakened by outflows from oil and a learning company. Later as Hang Seng fell and the yuan weakened sustained buying of $ took the rupee to 74.5450. However, inflows limited the rupee depreciation and it closed at 74.4625 for the day.
Most Asian currencies have fallen against the dollar but RBI and inflows have kept a check on any further rupee depreciation.
The one-year forward premium was at 3.32 rupees, yielding 4.46 per cent on an annualized basis.''
Kshitij Purohit, Lead International & Commodities at CapitalVia Global Research Limited:
''RBI may be willing to retain a weaker rupee slightly above the 74.30 level in order to maintain a competitive exchange rate, since demand in international markets is picking up in the wake of good export growth in the last two months. The rupee has performed well among Asian currencies in 2021 to date, with the domestic currency depreciating by 2.25 percent over that time.
On the domestic front, USD/INR July opened on negative note and made a strong bullish candle in the starting of the session on 15-minute charts and was moving in a marginally sideways to Bearish trend for rest of the session.''
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 273.51 points or 0.52 per cent lower at 52,578.76, while the broader NSE Nifty declined 78 points or 0.49 per cent to 15,746.45.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
''The market failed to surpass the level of 15900 for the third consecutive day, which triggered bull liquidation below the level of 15750. During the day, Nifty fell to 15700 level where it has the support of huge Put writing. The market corrected mainly due to consistent and aggressive selling from FIIs in the Asian markets, which also weighed on the domestic market sentiment.
Weakness in Dr. Reddy's resulted in a massive liquidation in the shares of other pharmaceutical companies, dragging down the Nifty Pharma index by more than four percent during the day, which is the biggest intraday fall since December 2020.''
According to exchange data, the foreign institutional investors were net sellers in the capital market on July 26 as they offloaded shares worth Rs 2,376.79 crore. Global oil benchmark Brent crude advanced 0.39 per cent to $ 74.79 per barrel in futures trade.