Rupee recovers from record lows to end 11 paise higher against dollar

The rupee on Tuesday hit its life-time intra day low of 77.79 before closing 11 paise higher against the US currency on a stellar rally in the domestic stock markets and a pullback in the dollar.

After opening lower at 77.67, the local unit plunged further to its life-time intra-day low of 77.79 due to a spike in crude oil prices and disappointing macroeconomic data.

However, a strong rally in the domestic equities helped the rupee rebound and close at 77.44, showing net gains of 11 paise over the last close of 77.55. The forex market was closed on Monday on account of Buddha Purnima.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.41 per cent to 103.75. The US dollar has eased around 1.5 per cent from the last week's two-decade high levels.

Brent crude futures, the global oil benchmark, surged 0.74 per cent to USD 115.09 per barrel.

"Recovery in domestic equities along with stronger regional currencies supported the rupee to recover after touching a record low of 77.7950, the third time in two weeks," said Dilip Parmar, Research Analyst, HDFC Securities.

Higher inflation, depressed risk assets performance and foreign fund outflows weighing on the local unit.

"The dollar index is calming a little after reaching two decades high. It seems the greenback is entering into consolidation as treasuries oscillate around 3 per cent and risk assets witness bargain buying," Parmar added.

According to Parmar, Spot USDINR is expected to consolidate in the near-term with resistance at 77.75 and support around 77.30.

"The Indian Rupee depreciated against the dollar on Tuesday weighed down by high crude prices, rising inflation and weak risk appetite," said Sriram Iyer, Senior Research Analyst at Reliance Securities.

Meanwhile, wholesale price-based inflation soared to a record high of 15.08 per cent in April mainly on account of spiralling prices of food, fuel and other commodities, which may prompt the Reserve Bank to hike interest rates in upcoming monetary policy review next month.

However, stronger Asian and emerging market peers, dollar sales by state-run banks, likely on behalf of the Reserve Bank of India and exporters hedging their exposures kept losses in check, Iyer added.

Additionally, the local unit got some support from rising domestic equity markets. India's BSE Sensex equity index rose 2.5 per cent this Tuesday.

The US Dollar is trading weaker this Tuesday afternoon in Asian trade as investors trimmed bets ahead of US Fed Chair Jerome Powell's speech.

Powell's speech will be keenly watched to gauge any new insights on the direction of interest rates, Iyer said.

Praveen Singh, AVP- Fundamental currencies and Commodities analyst, Sharekhan by BNP Paribas said that soft tone in the US dollar and risk-on sentiments in global markets have cushioned the downside.

The dollar declined on positive undertone in the risk assets and weak economic data.

"However, overall shaky risk sentiments and concerns over global economic recovery may cap sharp upside. Tensions due to the Ukraine war may also weigh on the rupee," Singh said, adding that the rupee may trade in the range of 76.80-78.30 in the next couple of sessions.

Jateen Trivedi, VP Research Analyst at LKP Securities said that the rupee can be seen with positive moves as buyers are seen near levels of 77.75. 

"Resistance for the rupee is at 77.15-77.20 which can be tested in coming sessions. Crude prices can halt rupee gains if prices of WTI crude start moving above USD 115," Trivedi said.

The commerce ministry on Friday said India's merchandise exports surged 30.7 per cent to USD 40.19 billion in April on account of healthy performance by sectors like petroleum products, electronic goods and chemicals, even as the trade deficit widened to USD 20.11 billion during the month.

On the domestic equity market front, the BSE Sensex ended 1,344.63 points or 2.54 per cent higher at 54,318.47, while the broader NSE Nifty jumped 417.00 points or 2.63 per cent to 16,259.30.

Foreign institutional investors remained net sellers in the capital market on Monday as they offloaded shares worth Rs 2,192.44 crore, as per stock exchange data.