Rupee Continues To Slide As It Opens Weaker Against US Dollar
The rupee's trading range is expected to be between 86.20 and 86.50.
The Indian rupee opened weak against US Dollar on Tuesday as it slid 16 paise to open at 86.50 against the US Dollar.
The domestic currency closed lower against the US dollar on Monday, weakening by 13 paise to settle at 86.34. The domestic currency had opened on a weak note, depreciating by 14 paise to 86.35. In contrast, last week, the rupee had strengthened, closing 26 paise higher at 86.21 on Friday, according to Bloomberg data.
During morning hours the dollar index was trading 0.50% higher at 107.87 at 08:58 a.m. on Tuesday. Crude oil prices also saw an uptick as well, with Brent crude trading 0.13% up at $77.18 per barrel at 08:58 a.m.
Moreover, in a move to bolster liquidity in the banking system, the Reserve Bank of India announced a series of special measures on Monday. These include open market operations purchases, longer tenure variable rate repo auctions, and interventions in the foreign exchange market. The central bank’s measures are expected to infuse around Rs 1.5 lakh crore of liquidity into the banking system. As part of this, the RBI will conduct OMO bond purchase auctions totaling Rs 60,000 crore in three tranches on Jan. 30, Feb. 13, and Feb. 20, respectively.
The rupee ended Monday at 86.3425, with expectations for it to open around 86.42 on Tuesday. According to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, the day's trading range is expected to be between 86.20 and 86.50.
Bhansali also suggested that exporters might consider hedging small amounts near the 86.60 level, which is currently being supported by the RBI. On the other hand, importers are advised to buy on dips.
Despite a slight recovery yesterday, the rupee faces pressure from ongoing risk aversion, with foreign portfolio investors continuing to sell Indian equities while purchasing dollars. This trend has seen the rupee fluctuate between 86.20 and 86.45, and Bhansali expects this range to persist as FPIs continue their dollar buying. The RBI’s liquidity measures are also expected to help reduce premiums, further influencing currency dynamics.
