Yahoo Finance USD/INR: Rupee Extends Losses, Falls 8 Paise in Early Trade
The Indian rupee opened lower, depreciating by 8 paise against the U.S. dollar in early trade Tuesday as strong greenback and volatility in the domestic equity market continued to pressurize the battered Asian currency.
The rupee hit a three-month low on Monday as traders moved to the safety of the U.S. dollar amid rising COVID-19 cases that threaten to derail the global economic recovery.
The dollar to rupee conversion today rose to 74.95 against the U.S. currency, up from Monday’s close of 74.87. The rupee has lost over 170 paise in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened over 60 paise so far this month.
“The rupee witnessed sharp depreciation against the dollar in the last session and lost 55 paise amid a strengthening dollar index. The safe-haven US dollar moved higher against a basket of major currencies on Monday as investors grew nervous about a raging coronavirus variant that could threaten the outlook for a global economic recovery. The greenback jumped even as the US 10-year Treasury yield dropped to a more than the five-month low of 1.176%,” noted analysts at ICICI Direct.
“The USD to INR has moved higher towards 75 levels surpassing its highest Call base. Continued up move towards 75.50 is expected in the coming sessions. The dollar to rupee July contract on the NSE was at 75.02 in the last session. The open interest fell almost 1% for the July series while August series OI increased by almost 60%.”
The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading nearly flat at 92.894 – not far from this year’s high of 93.437.
The world’s dominant reserve currency, the USD, is expected to rise further over the coming year, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to INR pair higher.
It is worth noting that sustained foreign fund outflows, higher oil prices, and firm U.S. dollar will continue to weigh on the rupee.
Global oil benchmark Brent futures traded 0.12% higher at $68.70 per barrel at the time of writing. Earlier this month, oil prices spiked to a three-year high of $77.84 per barrel as OPEC+ failed to reach an agreement. Higher oil prices would push up the inflation expectations and widen India’s trade deficit, which could hurt the Indian rupee.
The benchmark equity indices BSE Sensex was trading 290 points or 0.56% lower at 52,262.45, while the broader NSE Nifty slumped 95.90 points or 0.61% to 15,655.35. Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 2,198.71 crore, as per exchange data.
This article was originally posted on FX Empire
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