The Indian rupee closed weaker against the US dollar on Wednesday, continuing its downward trend from the previous day.
Rupee closed 22 paise weaker at 85.42, following its close at 85.20 per dollar on Tuesday. The domestic currency opened 7 paise lower at 85.27 against the US dollar on Wednesday.
Earlier, the rupee snapped a five-day winning streak as rising crude oil prices and a recovery in the dollar index weighed on sentiment. Brent oil prices rose as investors considered a fresh round of sanctions against Iran and a drop in US crude stocks, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Additionally, a softer tone from US President Donald Trump on the Federal Reserve helped markets recover. Trump backed off from threats to fire Fed Chair Jerome Powell and signaled the possibility of lower tariffs against China. This led to a rise in the dollar index, while the US 10-year Treasury yield slightly decreased. All three major US indices gained more than 2.5% following Trump's comments, Bhansali added.
Bhansali also noted that the dollar was trading near three-year lows against major currencies, as investors were concerned about trade tensions and Trump's attacks on the Fed. The US Trade Secretary suggested a possible de-escalation in US-China trade tensions, which could lead to substantial tariff reductions.
The trading range for the rupee on Wednesday stood at 85.00 and 85.50. Exporters were advised to wait to sell, while importers were advised to hedge payables around the 85.00 level, as per Bhansali.
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