Rupee drops for 2nd day, skids 7 paise to 73.35 per USD

Mumbai, Oct. 13 (PTI): The rupee depreciated 7 paise to close at 73.35 against the US dollar on Tuesday, tracking muted domestic equities and a strengthening greenback overseas.

At the interbank forex market, the rupee opened on a weak note at 73.41, and shuttled between a high of 73.32 and a low of 73.41 against the American currency.

It finally finished at 73.35, down 7 paise over its previous close of 73.28.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.18 per cent to 93.23.

Forex traders said the rupee dropped for the second straight session as investors remained cautious following muted domestic macroeconomic data.

Rising food prices pushed retail inflation to an eight-month high of 7.34 per cent in September, above the RBI’s comfort level, while industrial output contracted 8 per cent in August, official data showed on Monday.

On the equity market front, the 30-share BSE Sensex ended 31.71 points or 0.08 per cent higher at 40,625.51. The broader NSE Nifty inched up 3.55 points or 0.03 per cent to 11,934.50.

Foreign institutional investors were net buyers in the capital markets, purchasing shares worth Rs 615.17 crore on Monday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, rose 0.74 per cent to USD 42.03 per barrel.

“The Indian rupee depreciated marginally for the second straight session against the dollar, tracking a broad-based decline in regional currencies and higher-than-expected domestic inflation print,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.

He added that risk appetite waned amid uncertainty surrounding the COVID-19 vaccine and a fiscal stimulus stalemate in the US.

“We expect persistent dollar-buying by the RBI to mop up foreign and portfolio flows, so appreciation bias for the currency could be limited,” Iyer said.

Traders said foreign fund inflows flows into the domestic markets capped the rupee’s losses. Looking ahead, markets could remain range bound till the outcome of the US elections.

“Market players doubt that US Republicans and Democrats would reach a consensus and pass the measures before the election. The greenback strengthened against major peers as investors remained skeptical over the additional US stimulus,” said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.

Vakil further noted that weaker domestic economic data also weighed on rupee. Higher-than-expected inflation numbers and contraction in industrial output dented sentiment.

“Rupee opened on a lower note but consolidated in a narrow range for the second successive session after India’s inflation in September rose to 7.34 per cent thereby trimming expectation of further rate cut by the RBI,” said Gaurang Somaiya, Forex and Bullion Analyst, Motilal Oswal Financial Services.

Somaiya further said “on the domestic front, lack of cues is likely to keep the volatility low for the currency. Dollar rose marginally against its major crosses ahead of the inflation number that will be released today evening. Expectation is that price rise could be at a slower pace and that could keep gains capped for the dollar.”