Rupee falls for 8th day, slumps 76 paise to 74.08 vs USD

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Mumbai: Declining for the eighth consecutive session, the Indian rupee tumbled 76 paise to close below the 74-mark against the US dollar on Thursday, tracking a strong greenback overseas after the US Federal Reserve surprised the market by signalling rate hikes sooner than expected.

At the interbank forex market, the domestic unit opened weak at 73.65 against the American currency, then lost further ground and finally closed at 74.08, showing a fall of 76 paise over its previous close.

On Wednesday, the rupee had settled at 73.32.

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The local unit witnessed an intra-day high of 73.57 and a low of 74.08 against the greenback.

The domestic currency has lost 128 paise in the eight trading sessions to Thursday.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.60 per cent to 91.67.

“Indian Rupee depreciated amid strong dollar. Further, risk aversion in the global markets and disappointing macroeconomic data added downside pressure,” said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.

“Dollar gained strength as US Federal Reserve surprised market by signalling rate hike sooner than expected. Their median projection showed central bank lifting their benchmark rate to 0.6 per cent from near zero by the end of 2023,” Mukadam said.

“Further, market participants fear that the second wave of COVID-19 infection in India has dampened the expectation of quick economic recovery. Rupee may trade in the range of 73.25 to 74.15 in next couple of sessions,” he added.

On the domestic equity market front, the BSE Sensex ended 178.65 points or 0.34 per cent lower at 52,323.33, while the broader NSE Nifty fell 76.15 points or 0.48 per cent to 15,691.40.

Brent crude futures, the global oil benchmark, rose 0.12 per cent to USD 74.48 per barrel.

Foreign institutional investors were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 870.29 crore, as per exchange data.

“Rupee opened with deep cut after the FOMC fireworks and continued falling through the day along with domestic equities. A hawkish surprise across a few dimensions from Federal Reserve indicating financial conditions are tightening which pulled dollar and yields higher while dragged stocks lower,” said Dilip Parmar, Research Analyst, HDFC Securities.

Given the strength in the dollar, it is likely that the USD/INR could now move in a range of 73.50-74.50 in the near-term, Parmar added.

“The Indian rupee has witnessed a sharp depreciation of more than one per cent in today’s trade owing to the strength witnessed in the dollar index and hawkish tone of the US Fed, which has dented the risk-on sentiments in the markets,” said Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking

With a faster than expected rise in inflation and swift recovery in the US economy, the US Fed has projected rate hikes and tapering of its massive bond-buying program sooner than expected, all of which bodes well for further strength in the greenback, Sachdeva said.

Besides, rise in crude oil towards two-year highs is also weighing on the local unit.

In the near term, the path for the domestic currency looks skewed on the downside and we expect it to test levels of around 74.90 in coming days, Sachdeva added.