Snapping its losing streak, the rupee gained seven paise against the US dollar on Friday, July 9, to settle at 74.64, tracking weaker American currency in the global market. At the interbank foreign exchange market, the local unit opened strong at 74.68 against the dollar and hovered in the range of 74.57 to 74.68 throughout the session. In an early trade session, the domestic unit rose four paise to 74.67 against the greenback. The rupee closed at 74.64 against the American currency, registering a gain of seven paise over its previous close.
Rupee Snaps Five-Week Fall Against Dollar: Here's Why:
The domestic currency snapped a five-week decline driven by dollar inflows towards initial public offerings (IPOs), while the benchmark 10-year bond yield registered its biggest weekly rise in five months due to worries over inflation.
This means that on a weekly basis, the domestic unit gained 10 paise to register its first weekly gain in the past six weeks. The local unit had slipped by more than three per cent or 229 paise in the five weeks to July 2.
However, a muted trend in domestic equity markets and the rising crude prices restricted the gain in the domestic currency, according to forex dealers. The dollar index, which gauges the greenback's strength against a basket of six currencies, declined 0.09 per cent to 92.32.
Inflows for GR Infra projects IPO and Clean Science and Technology IPO which closed for subscription today, helped the local unit, according to traders. Most investors await the online food delivery company Zomato's $1.3 billion IPO.
While, India's benchmark 10-year bond yield ended at 6.19per cent, compared to its previous close of 6.12 per cent. On the week, the yield rose 12 basis points, its highest rise since mid-February.
The country's retail inflation for June 2021 - which will be released on Monday, July 12, may have accelerated to a seven-month high due to rising fuel and food prices, according to a recent poll conducted by news agency Reuters. This means that retail inflation last month stayed above the Reserve Bank of India's comfort zone for the second straight month.
What analysts say:
Mr. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services:
“The USDINR spot is not breaking the immediate resistance of 74.95-75 zone. For next week, the fx market focus will be on Zomato IPO and US CPI data along with fears over the global spread of delta variant. The Zomato IPO will open for subscription on Wednesday, and it may attract FII's participation. So, until the spot is trading below the resistance of 74.95-75, it will be slightly bearish. Only a break of 75 will push prices towards 75.25 zone, while 74.25-74 will act as strong supports.”
Mr Amit Pabari, MD, CR Forex:
''Fundamentally, higher crude oil prices, concerns over fiscal slippage, higher inflation & strengthening US dollar on hawkish fed could keep the rupee's momentum on a depreciating side. Overall, 74.20-74.40 is likely to remain strong support for the USDINR pair and strategy would be to buy on every dip towards the support levels. On the higher side, immediate resistance lies at the 74.90-75.00 zone. If that is taken out then we might see a sharp up move till 75.20-75.50 levels.''
Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:
''Much ado about nothing. That is exactly how USDINR fared over this week. There were some key events like hawkish minutes from US Fed causing carry trade to unwind and trigger sell-off in equity markets and also no-deal in OPEC meeting causing volatility in oil prices. However, all of that failed to increase volatility in USDINR. July futures closed 0.17 per cent lower at 74.79 levels.
Next week can be eventful with FPI inflows expected to pick up in the marquee IPO from Zomato. At the same time, CPI inflation and industrial production data will be due from India. A higher inflation print and softer industrial activity, which are expected, can be positive for USDINR. However, the biggest driver of USDINR will still be the trend in the US Dollar Index and in the equity markets.''
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 182.75 points or 0.35 per cent lower at 52,386.19, while the broader NSE Nifty declined 38.10 points or 0.24 per cent to 15,689.80. The equity benchmarks registered losses for the second straight session dragged by index heavyweights such as HDFC Bank, Reliance Industries, Axis Bank, and Tata Consultancy Services.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:
"The last week has been volatile for the traders, the week's opening was positive but once again the market took resistance near 15900/ 53100 and corrected sharply. The important point is, on Thursday, it broke 15800/ 52750 short term support level and post breakdown, selling pressure intensified which is broadly negative for the key benchmark indices.
Among Sectors, despite weak market conditions strong buying was seen in Reality and Metal stocks. Whereas, witnessed profit booking in Auto, PSU Banks and selective IT stocks.
Sector Specific, Reality, Banking and Financial stocks likely to outperform in the near future.”
According to exchange data, the foreign institutional investors were net sellers in the capital market on July 8 as they offloaded shares worth Rs 554.92 crore. Brent crude futures, the global oil benchmark, surged 0.98 per cent to $ 74.85 per barrel.