Rupee Drops To 74.44 Against US Dollar In Early Trade After Fed Minutes
The rupee declined by six paise against the US dollar on Thursday, January 6, to touch 74.44 in opening trade, tracking the strength of the American currency in the overseas market after hawkish US Fed minutes. At the interbank foreign exchange market, the domestic unit opened at 74.44 against the dollar, registering a decline of six paise from the last close. The local unit also witnessed a high of 74.34 in initial deals.
Yesterday, the rupee rose 20 paise to close at 74.38 against the greenback. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.02 per cent to 96.19.
Investors saw minutes from the Federal Reserve meeting as a sign that the US central bank might hike interest rates faster to cool inflation and this could lead to outflows from the domestic markets, forex traders said. According to minutes from the Fed's December 14-15 policy meeting, policymakers believe the US job market is nearly healthy enough and ultra-low interest rates are no longer needed.
Also, growing concerns over the Omicron variant of coronavirus and its impact on economic recovery as well as firm crude oil prices weighed on the local unit.
On the domestic equity market front, the 30-share Sensex was last trading 717.2 points or 1.19 per cent lower at 59,505.95, while the broader NSE Nifty slipped 198.85 points or 1.11 per cent to 17,726.40.
According to exchange data, the foreign institutional investors remained net buyers in the capital market on Wednesday, as they purchased shares worth Rs 336.83 crore. Global oil benchmark Brent crude futures fell by 1.35 per cent to $79.71 per barrel.
What analysts say:
Mr. Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors:
''So the hawkish dollar minutes has kept dollar well bid against most Asian currencies including Yen though it could not rise much against Euro and GBP. The Dow fell after making record highs and Dow has our index fallen after rising for the last five days.
Yesterday it was major oil and telecom company as also Engineering that sold dollars. Possibility of them selling today still there and their exporters may hedge their cash/near term at 74.55 and importers to buy $ at 74.30 as FED remains hawkish and NFPR is expected strong tomorrow.''
Mr Amit Pabari, MD, CR Forex:
''After trading on a positive note yesterday due to the selling of dollars by a couple of big corporates, today the rupee is expected to trade in the range of 74.25 to 74.75 with a depreciating bias. Fed meeting minutes suggest that officials are ready to aggressively dial back their bond-buying and go for rate hike immediately. Chances of a rate hike in March jumped to 70 per cent from near 25 per cent a month ago.
The domestic equities opened lower by more than one per cent, following lower US & peer markets. Although, FIIs have been positive since the start of this year, but could turn into net sellers on the hawkish Fed
The volatility in the USDINR pair is likely to remain high on both sides due to the tussle between 'corporate inflows' and 'sluggish economic outlook.''