Rupee inches higher vs dollar, off record low

The rupee inched higher on Wednesday, bouncing back from a series of lows hit this week. The domestic currency was last seen trading at 84.64 against its American peer, supported by some weakness in the dollar, gains in the Chinese yuan, and strong foreign inflows recorded the previous day. 

The dollar index—comprising the euro, the Japanese yen, the British sterling, the Canadian dollar, the Swedish krona and the Swiss franc—fell as much as 0.1 per cent to 106.28. It was last seen trading at 106.31. 

On Tuesday, the rupee slumped to an all-time low of 84.75 before settling at 84.69 for the day, amid pressure emanating from strong demand for dollars and weakness in the Chinese currency.

ALSO READ: Is rupee-dollar pair headed towards 85 vs dollar? Check out analysts' projections 

The RBI reportedly intervened to counter rupee depreciation. 

Foreign institutional investors (FIIs) made net purchases to the tune of Rs 3,665 crore on Dalal Street on Tuesday, though domestic institutional investors (DIIs) net sold equities worth Rs 251 crore, according to provisional exchange data. The bout of FII inflows followed net outflows of Rs 16,378 crore recorded in the past three sessions.  

Wednesday's FII inflows were also the largest since November 25. 

Foreign portfolio outflows have been a persistent pain point for the domestic currency over the last two months.

What to expect in the USD-INR pair going forward?

The dollar index has staged very high volatility and looks unable to hold its previous sessions' gains amid recovery in the global equity markets, according to Manoj Kumar Jain, Director-Head Commodity and Currency Research at Prithvi Finmart. 

"Easing risk sentiments after Israel-Hamas ceasefire deal limiting gains of the dollar. However, political instability in France and the declaration of Martial Law in South Korea supported some safe-haven demand for the US dollar. The US job openings data released on Tuesday was better than expected, supporting the dollar index at lower levels," said Jain.

He expects the dollar index to remain volatile in the range of 104.45-106.85 this week amid volatility in the global financial markets, the Fed Chairman’s speech and the US job data.

The analyst expects the rupee to also remain volatile in the 84.2400-85.1500 range this week.   

With inputs from agencies