Rupee falls 2 paisa to settle at 83.97 against US dollar

MUMBAI — The rupee consolidated in a narrow range and settled for the day lower by 2 paisa at 83.97 against US dollar on Thursday, after the Reserve Bank expectedly kept the benchmark interest rate and stance unchanged for the ninth straight policy meeting.

Forex traders said weak domestic markets, surge in crude oil prices and foreign fund outflows weighed on the rupee. However, a decline in the US dollar index prevented the local unit from declining sharply.

At the interbank foreign exchange market, the local unit opened at 83.94 and touched an intraday low of 83.97 and a high of 83.93 against the dollar during the session.

It finally settled at 83.97 against the American currency, down 2 paisa from its previous close.

On Wednesday, the rupee consolidated in a narrow range and settled for the day lower by 3 paise at 83.95 against US dollar.

The local unit had slumped 37 paise to settle at an all-time low of 84.09 against the US dollar on Monday.

“We expect the rupee to trade with a negative bias on selling pressure from foreign investors and weak domestic markets. Ongoing geopolitical tensions in the Middle East may also pressurise the rupee,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.

However, weak US dollar may support the rupee at lower levels. Any intervention by RBI may also support the rupee.

“Traders may take cues from weekly unemployment claims data from the US. USD-INR spot price is expected to trade in a range of INR 83.75 to INR 84.20,” Choudhary said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.12 per cent to 103.07 points.

Brent crude, the global oil benchmark, was trading 0.78 per cent lower at USD 77.72 per barrel in futures trade.

On the macroeconomic front, the Monetary Policy Committee (MPC) of the Reserve Bank kept the benchmark repurchase or repo rate unchanged at 6.50 per cent.

Announcing the bi-monthly monetary policy review RBI Governor Shaktikanta Das said Indian rupee remained largely range-bound so far this financial year.

The panel also decided to retain a policy stance at “withdrawal of accommodation” to aid MPC’s focus on bringing inflation towards its 4 per cent target.

The status quo by RBI comes amid varied central bank action in advanced economies. While the Bank of England reduced interest rates last week, the Bank of Japan hiked rates to their highest levels since 2008. Also, fears of a US recession have risen on the back of weak employment numbers, piling up pressure on the Federal Reserve to start cutting rates to support the economy.

In the domestic equity market, the 30-share BSE Sensex fell 581.79 points, or 0.73 per cent, to close at 78,886.22 points, while the Nifty declined 180.50 points, or 0.74 per cent, to 24,117.00 points.

Foreign institutional investors (FIIs) were net sellers in the capital markets on Thursday as they offloaded shares worth INR 2,626.73 crore, according to exchange data.