Rupee declines by 8 paise on rebound in crude oil, greenback

The rupee declined by 8 paise to settle at 82.71 (provisional) against the US currency on Tuesday due to a rebound in crude oil prices and greenback in the global markets.

Foreign fund outflows from the equity markets also weighed on the rupee sentiment, forex dealers said.

Volatile equity markets and recovery in crude oil prices during the day hit the rupee sentiment, dragging the unit to a day’s low of 82.73.

The rupee settled lower by 8 paise at 82.71 against the US dollar. On Monday, the rupee edged up by 1 paisa to settle at 82.63.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.01 per cent higher at 104.07.

Brent crude futures, the global oil benchmark, rose 0.60 per cent to USD 84.93 per barrel.

On the domestic equity market front, the BSE Sensex closed higher by 79.22 points at 65,075.82 while the broader Nifty advanced by 36.60 points to close at 19,342.65.

Foreign Institutional Investors (FIIs) were net sellers in capital markets on Monday as they offloaded shares worth Rs ,393.25 crore, according to exchange data.

USD-INR may consolidate within 81.70- 82.75, expect bargain buying near lower band; BoE, ECB eyed for cues

BY Dilip Parmar

The Indian rupee notched the best week since 3 March following the weaker greenback and risk-on sentiments. All Asian currencies gained against the US dollar in the week gone. However, the rupee underperforms among the region on weekly as well as month to date amid higher dollar demand from importers.

Short-term Outlook

Spot USDINR formed the Bullish Engulfing pattern on Friday, representing a change of sentiments. The pair has closed below 200 DMA but it has remained within 2 standard deviations of 20 DMA since February. We expect the pair to further consolidate between 81.70 to 82.75 and expect bargain buying near the lower band.

The ICE Dollar index registered its worst week in eight months following a fall in US yield after a surprise drop in monthly core inflation, the lowest since 2021, which led traders to abandon their previous idea that there might be two more rate increases still to come. The dollar fell and everything else climbed. The Japanese Yen and Euro gained the most against the US dollar among the major currencies. Elsewhere, a gauge of EM currencies saw its best week since January. Oil notched its third weekly advance, but fell on Friday as traders locked in profits and the commodity’s 200 DMA again provided a barrier to further advances.

As per the CFTC data, the flow was mixed during the week in the FX. Speculators sold Euro, Swiss franc and Australian dollar while gone for a long pound. However, they held a net short dollar position on aggregate of $12.5 billion.

What to Watch

China’s economy will be front and centre in the week ahead, starting with the People’s Bank of China setting its one-year rate on Monday. Later that day second-quarter GDP and June activity data. The UK and EU inflation report due Wednesday is set to be the week’s main event as it will help traders and investors fine-tune their bets on how far the Bank of England and ECB will raise interest rates after a strong repricing over the past week.

(Dilip Parmar is a Research Analyst at HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)