The Indian rupee failed to maintain the weekly gaining momentum and closed the week lower by 51 paise, or 0.80 percent against the U.S. dollar.
Tracking losses in the local equity markets, the domestic currency on Friday pared some of its losses during the day, however closed at near two-week low of 64.06. It had plunged to a fresh one-month low of 64.20 on Thursday. Rupee fell after the government revised upward its fiscal deficit target to 3.5 percent and 3.3 percent for the financial year 2018 and 2019, respectively, in the Budget speech.
Apart from wider fiscal deficit, fears of a pick-up in inflation and rising U.S. bond yields also dented sentiment.
It was a double-whammy for the Indian currency, following the Federal Open Market Committee announcement last week, where in the U.S. Federal Reserve signaled further gradual hikes along with hawkish comments. A sudden rise in global crude prices also added to the worries.
In the meantime, country's foreign exchange reserves rose sharply by $3 billion to touch a new life-time high of $ 417.8 billion in the week to Jan. 26, according to Reserve Bank of India data.
On the global front, the U.S. dollar was the top performer on the last day of the week. The index was last quoted at 89.20, up over 0.6 percent. The index rose after monthly jobs report surpassed expectations. U.S. data showed that wages rose in January at the fastest rate since 2009 at 2.9 percent. The non-farm payrolls came in at 2 lakh above the 1.8 lakh expected, and the unemployment rate remained steady at 4.1 percent.
In the week ahead on the domestic front, investors will remain cautious ahead of the RBI policy preview on Wednesday. Analysts said while the central bank is expected to keep interest rates on hold next week, the Budget could toughen the central bank's tone.
Globally, a slew of economic data from China along with manufacturing services data in the major economies will remain key catalyst in the week ahead.
Following events are likely to affect the currencies markets:
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