Indian Rupee gains amid soft dollar index; opens higher at 86.33/$

India Rupee today: The domestic currency opened 9 paise higher at 86.33 against the dollar on Thursday

The Indian rupee traded higher on Thursday, providing some relief after a consecutive losing streak as pressure persisted due to continued dollar demand driven by foreign outflows.

 

The domestic currency opened 9 paise higher at 86.33 against the dollar on Thursday, according to Bloomberg. The rupee has witnessed nearly 0.75 per cent depreciation in the current calendar year. 

 

Despite a decline in the Dollar Index and a rally in risk assets, the Indian rupee has not registered any significant gains, reflecting the presence of short positions and sustained dollar demand in the system, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.  

 

  The Real Effective Exchange Rate (REER) for June stood at 100.36, indicating that the rupee is fairly valued. However, after the recent appreciation in other currencies, the rupee may now be slightly undervalued, Bhansali said. A REER value above 100 indicates an appreciation of the rupee relative to the base year, potentially making Indian exports less competitive. 

 

The Reserve Bank of India (RBI) net bought $1.76 billion in May, after a net sell of $1.6 billion in April. The central bank bought $9.12 billion, while it sold $7.36 billion of foreign currency in May. 

 

The rupee opened is expected to close around 86.33 and is expected to trade in the range of 86.10 to 86.60, Bhansali said. "Exporters have a good opportunity to hedge by selling dollars at current levels. Importers, however, may consider holding off on hedging, as the rupee is likely to strengthen despite headwinds such as the lack of progress on the U.S.-India trade deal, especially when other global trade agreements are moving forward."

 

Attention now shifts to next week’s US interest rate decision, which will be a key directional trigger, Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities, said. "Rupee is expected to trade within a range of 85.80–86.70," he added. 

 

Meanwhile, equity markets in Asia rose amid optimism fueled by US-Japan trade deal and positive signals pointing to a potential agreement with the European Union. The EU and US are moving towards a trade agreement that could include a 15% US baseline tariff on all EU exports, as per reports. The dollar index, a measure of the greenback against a basket of six major currencies, was down 0.06 per cent at 97.15.

 

In commodities, crude oil prices were up marginally on the trade deal hopes. Brent crude price was up 0.31 per cent at 68.72 per barrel, while WTI crude prices were higher by 0.35 per cent at 65.48, as of 9:15 AM IST.