Rupee Declines To Settle At 75.03 Against Dollar On Month-End Dollar Demand

The rupee declined by seven paise against the US dollar on Wednesday, October 27, to settle at 75.03 due to month-end dollar demand from the importers and tracking a muted trend in domestic equities. At the interbank foreign exchange market, the domestic currency opened at 75.02 and registered an intra day high of 74.90. It witnessed a low of 75.05 during the day trade. In an early trade session, the local unit slipped six paise to 75.02 against the greenback. The local unit finally settled at 75.03 a dollar, down seven paise, against its previous close of 74.96.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent up at 93.97. According to analysts, a stronger dollar in overseas markets and suspected RBI intervention ahead of IPOs also weighed on the local currency. 

What analysts say:

Mr Amit Pabari, MD, CR Forex:

''The premiums for the end of Aug and Sep 2022 are currently quoting near 8th October levels of 2.93 and 3.21. This suggests premiums have not fallen over the last 20 days. The reason behind the elevated premium is RBI's liquidity tightening fears. The central bank has also been hiking the quantum of its variable rate reverse repo operations since August in phases, and by December the quantum will be Rs. 6 lac crores.

Moreover, rising commodity prices have increased the expectation of future inflation and that is also letting the forward curve to get steeper. From the US front, the yield curve is flattening as traders are discounting Fed's early rate hike and hence interest rate differential is favoring the premiums. This could recall the carry traders to set up long positions and could help Rupee to gain against USD over the short term.''

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:

“Another lackluster day in USDINR with primary market FPI flows being offset by suspected RBI intervention and demand for US Dollars from oil marketing companies. As a result, the spot closed marginally higher at 75.02, up 6 paise.
Over the near term, IPO-related FPI flows will remain heavy and that along with carry trade may keep USDINR capped near 75.20/25 levels. But strong US Dollar Index and RBI intervention may prevent a sharp slide. Therefore, a range of 74.75 to 75.25 may unfold over the near term.”
 

Domestic Equity Markets Today:

On the domestic equity market front, the BSE Sensex ended 206.93 points or 0.34 per cent lower at 61,143.33 while the broader NSE Nifty declined 57.45 points or 0.31 per cent to 18,210.95.
 

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities: 

''After a strong pullback rally, profit-taking came to the fore in a volatile market and benchmark Nifty took resistance near the 18350 level. Post the muted opening, the index made a couple of attempts to clear the 18350 hurdle but due to lack of follow-through buying, the markets saw a technical selloff in late afternoon trades.

Technically, the index has formed a small bearish candle near the 18350 resistance level but at the same time, on intraday charts, it has maintained a higher bottom series formation. Ahead of monthly F&O expiry, volatility may continue, hence level-based trading would be the ideal strategy for day traders.''

According to the exchange data, the foreign institutional investors were net sellers in the capital market on October 26 as they offloaded shares worth Rs 2,368.66 crore. Oil prices eased in global markets with the benchmark Brent crude declining by 1.08 per cent to $ 85.47 per barrel