Indian Rupee trades weak as dollar gains weigh; opens lower at 85.27/$

Indian rupee opened lower on Wednesday, tracking a resurgence in the dollar index, a day after the currency snapped a five-day winning streak amid increasing foreign inflows into equities 

 

The domestic currency began the session 8 paise weaker at 85.27 after closing at 85.19 against the greenback on Tuesday, according to Bloomberg data. The currency has appreciated by 0.22 per cent in April and is on track to log gains for the second straight month. 

 

The dollar Index rebounded by 1.34 per cent to 99.64, supported by US President Donald Trump's softened stance, particularly toward the Federal Reserve and against China, according to Amit Pabari, managing director at CR Forex Advisors. Trump, on Tuesday, signalled easing trade tensions with China and ruled out plans to remove Federal Reserve Chair Jerome Powell. This diplomatic pivot has reduced recessionary fears, leading markets to trim expectations for aggressive easing by the Federal Reserve, Pabari noted. 

 

  The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was up 0.38 per cent to 99.29, as of 9:20 AM IST. The dollar index is likely to face support at the 98.50 level and resistance at the 99.60 level, according to Pabari. "A breach of the resistance could pave the path towards 101.50-102.00 levels."

 

Meanwhile, foreign portfolio investors continued to buy equities for the fifth consecutive day on Tuesday. Global funds bought stocks worth ₹1,290.43, taking the four-day purchase to over ₹17890 crore. 

 

The real effective exchange rate (REER) of the rupee continued to ease, dropping to 101.49 in March, down from 102.37 in February, according to the Reserve Bank of India’s monthly bulletin. A weaker REER can support export-driven sectors like engineering goods, information technology (IT), and pharmaceuticals, allowing the rupee’s strength to work in favour of India’s external sector, Pabari said.  

 

The RBI seems to have been present yesterday when the rupee approached 85.00 levels and actively seems to have bought dollars to curb the rupee's rise, which is not helping the exporters, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. " For the day, the range of 85-85.50 will be seen."

 

Crude oil prices climbed further, building on the previous day's gains, as investors assessed the impact of a new round of sanctions on Iran. Brent crude oil was up 0.42 per cent to $67.86 per barrel, while WTI crude was up 0.68 per cent at 64.10 per barrel as of 9:20 AM IST.