Rupee declines 6 paise to 74.44 against US dollar in early trade

The rupee declined by 6 paise to 74.44 against the US dollar in opening trade on Thursday, tracking the strength of the American currency in the overseas market after hawkish US Fed minutes.

Investors saw minutes from the Federal Reserve meeting as a sign that the US central bank might hike interest rates faster to cool inflation and this could lead to outflows from the domestic markets, forex traders said.

According to minutes from the Fed's December 14-15 policy meeting, policymakers believe the US job market is nearly healthy enough and ultra-low interest rates are no longer needed.

At the interbank foreign exchange, the rupee opened at 74.44 against the US dollar, registering a decline of 6 paise from the last close. The domestic unit also witnessed a high of 74.34 in initial deals.

On Wednesday, the rupee surged 20 paise to close at 74.38 against the US currency.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.02 per cent to 96.19.

The Indian Rupee opened flat to marginally weak on Thursday, tracking the strength of the dollar and weak Asian and emerging market peers, Reliance Securities said in a research note.

"Additionally, quicker than previously anticipated rate hike from the US Fed could witness outflows from the domestic markets and could weigh on sentiments," it added.

Moreover, growing concerns over the Omicron variant of coronavirus and its impact on economic recovery as well as firm crude oil prices weighed on the local unit.

Global oil benchmark Brent crude futures fell by 1.35 per cent to USD 79.71 per barrel.

On the domestic equity market front, the 30-share Sensex was trading 717.2 points or 1.19 per cent lower at 59,505.95, while the broader NSE Nifty slipped 198.85 points or 1.11 per cent to 17,726.40.

Foreign institutional investors remained net buyers in the capital market on Wednesday, as they purchased shares worth Rs 336.83 crore, as per exchange data.