Rupee opens 8 paise lower against US dollar amid subdued global cues

The rupee on Thursday opened eight paise lower at 71.05 against the US dollar. The domestic unit on Wednesday snapped its three-session winning streak to end at 70.97, down 28 paise. 

Rupee on Wednesday rose against the US dollar in the first half of the session but was weighed down in the later half following gains in the dollar against its major crosses. In the last few sessions volatility for the dollar has increased as better-than-expected economic numbers from the US is keeping the greenback supported at lower levels and flip-flop on trade talks is keeping the gains capped, said Gaurang Somaiya, Research Analyst(Currency) at Motilal Oswal Financial Services (MOFSL).

"Today, USD/INR pair is expected to quote in the range of 70.90 and 71.30," Somaiya added. 

According to a Reuters poll, a slowing domestic economy will prevent rupee from recouping this year’s losses against the dollar in 2020, with optimism around an easing in the US-China trade dispute not enough to give it a further boost. 

"After falling nearly 9 per cent in 2018, the Indian currency has shed another 4 per cent this year to touch a 2019 trough of 72.40 per dollar on September 3. It has since popped up over 2 per cent, along with other emerging market currencies, on hopes of a possible trade deal between the world’s two largest economies. But nothing has been agreed yet, let alone a meeting scheduled," the report added.

A slew of rate cuts by the Reserve Bank of India (RBI) has done nothing concrete so far to revive a slowing Indian economy, the report further said.

“We expect the rupee to weaken as risks of sluggish growth and fiscal slippage intensify,” Reuters reported quoting Rini Sen, India economist at ANZ, as saying. “Stable portfolio flows led by equities and global cues like trade negotiations, on top of rate cuts, have led to bouts of optimism. However, we think the currency market is under-pricing downside risks to domestic growth," Sen added. 

On the global front, Asian shares paused near multi-month peaks on Thursday while bonds eked out a bounce as reports of delays in sealing a preliminary Sino-US trade deal left investors frustrated at the lack of concrete progress.

In commodities, oil prices were unchanged after overnight losses amid caution over trade talks. Brent crude futures were flat at $61.74 a barrel. Prices fell $1.22, or almost 2 per cent on Wednesday. West Texas Intermediate crude futures were at $56.32 a barrel, down 3 cents from their last close, Reuters report said.