Rupee falls 18 paise to close at 74.52 as strong US dollar weighs on sentiment

The rupee depreciated by 18 paise to end at 74.52 (provisional) against the US currency on Thursday, as heavy selling pressure in domestic equities and a strong greenback in the overseas market weighed on investor sentiments.

In addition, investors remained concerned over rising crude prices and sustained foreign capital outflows, forex dealers said.

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At the interbank foreign exchange market, the local currency opened at 74.44, then lost further ground to quote 74.59 against the American currency.

The local unit finally settled at 74.52 a dollar, down 18 paise over its previous close of 74.34.

According to Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities, USD/INR spot closed at 74.52, tracking higher US Dollar Index.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.21 per cent up at 95.05.

"Thanks to a sharp up move in the US bond yields, post record CPI inflation, DXY touched a fresh 52-week high. Weakness in domestic equities is adding to the pressure on the rupee," Banerjee said.
Banerjee added that corporate USD inflows are keeping gains in check.

"Over the near term, USD/INR may trade with an upward bias within a range of 74.30 and 74.80 on spot," Banerjee noted.

According to Sriram Iyer, Senior Research Analyst at Reliance Securities the Indian Rupee depreciated against the dollar on Thursday weighed down by a jump in the US Dollar index.

The US dollar surged after US consumer prices increased to their highest rate since 1990, fuelling speculation that the Federal Reserve may raise interest rates sooner than expected, the Reliance Securities note said.

An interest rate hike could lead to foreign outflows from India and increase volatility across asset classes, including currencies, Iyer said.

The US Treasuries also strengthened this Thursday and lifted the dollar, and in turn weighed on the domestic unit, Iyer noted.

On the domestic equity market front, the BSE Sensex ended 433.13 points or 0.72 per cent lower at 59,919.69, while the broader NSE Nifty declined 143.60 points or 0.80 per cent to 17,873.60.

Meanwhile, Brent crude futures, the global oil benchmark, advanced 0.73 per cent to USD 83.24 per barrel.

Crude oil resumed its uptrend in the European trading session and weighed on sentiments.

"Rupee weakness continued around 74.52 compared to 74.34. CPI data rose, giving FED points to rethink rate decisions. Capital markets weakness gave a strong impetus to weaken the rupee. Going ahead rupee can be seen in a range of 74.35-74.75," said Jateen Trivedi, Senior Research Analyst at LKP Securities.

Foreign institutional investors were net sellers in the capital market on Thursday, as they offloaded shares worth Rs 1,637.46 crore, according to exchange data.