The rupee pared early losses to settle higher by 10 paise at 87.21 against the US currency on Tuesday as the dollar fell to a four-month low level and crude oil prices also stayed subdued.
A volatile trend in domestic equity markets and foreign capital outflows amid fear of recession in the US and trade-related uncertainties restricted the recovery in the local currency, forex traders said.
At the interbank foreign exchange, the rupee opened lower at 87.37 and touched the day’s low of 87.39 against the greenback in early trade. The unit later rebounded up to 87.17 before ending the session at 87.21 against the dollar, 10 paise higher compared to its previous closing level.
On Monday, the rupee crashed 36 paise to close at 87.31 against the
US dollar.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, attributed the rupee’s recovery to weak tone in the US dollar index and a decline in the US 10-year treasury yields.
He said that weak crude oil prices and mixed-to-positive domestic markets supported the rupee but FII outflows capped sharp gains.
Going further, Choudhary said, “Traders may take cues from JOLTS job openings data from the US. Investors may remain cautious ahead of the inflation data from the US and India this week. USD-INR spot price is expected to trade in a range of `86.95 to `87.40,”
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading lower by 0.58 per cent at 103.35, close to the level seen on
November 5.
Brent crude, the global oil benchmark, traded 0.71 per cent higher at US 69.77 per barrel in futures trade, struggling to reclaim the crucial $70-a-barrel mark.
Domestic equity markets settled almost flat with the 30-share BSE Sensex falling marginally by 12.85 points, or 0.02 per cent, to 74,102.32, and the Nifty gaining slightly by 37.60 points, or 0.17 per cent, to close at 22,497.90.
Foreign institutional investors (FIIs) offloaded equities worth `2,823.76 crore on a net basis on Tuesday, according to exchange data.
On the global macroeconomic front, US President Donald Trump sought to downplay business concerns over the uncertainty caused by his tariff moves and has not ruled out the possibility of a recession triggered by higher prices in the country.
Meanwhile, China has retaliated Trump’s 20 per cent tariff on Chinese imports with an additional 15 per cent tax on key American farm products, including chicken, pork, soybeans and beef. The escalating trade tensions led to a crash in the US markets on Monday.
