Rupee slips 11 paise to 85.75 against the US dollar amid strong greenback and low trading volumes

The rupee weakened by 11 paise to hit 85.75 against the US dollar in early trade on Thursday, reflecting global trends as the dollar continued its robust run. At the interbank foreign exchange market, the rupee opened at 85.69 before sliding further, marking a decline from its previous close of 85.64 on Wednesday.

The dollar's strength, driven by a rising dollar index and higher US 10-year bond yields, played a key role in the rupee's depreciation. The dollar index, which measures the greenback's performance against six major currencies, hovered at 108.32, down marginally by 0.15 percent, but remained well-supported around the 108 mark in recent sessions.

Forex traders noted that foreign institutional investors (FIIs) continued to pull out funds, contributing to downward pressure on the rupee. FIIs offloaded Rs 1,782.71 crore on Wednesday, indicating persistent outflows. Additionally, low trading volumes due to the ongoing holiday season in major economies like the UK and Europe further dampened sentiment.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, suggested that the rupee could trade in a range of 85.50 to 85.80 for the day. He highlighted the need to monitor liquidity levels as premiums for near-term forward contracts remain elevated.

On the domestic front, equity markets showed resilience, with the BSE Sensex climbing 270.48 points (0.34 percent) to 78,777.89, and the NSE Nifty rising 85.15 points (0.36 percent) to 23,828.05 in morning trade.

Meanwhile, crude oil prices edged higher, with Brent crude futures trading 0.44 percent up at USD 74.97 per barrel.

On the macroeconomic front, India's GST revenue for December grew by 7.3 percent year-on-year to Rs 1.77 lakh crore, signaling strong domestic economic activity. However, this was a dip from November's GST collection of Rs 1.82 lakh crore, which saw an annual growth of 8.5 percent.

The rupee's movement will remain under scrutiny as global market trends and domestic economic indicators continue to shape investor sentiment.