Mumbai: The rupee on Friday declined by 8 paise to settle at 82.64 against the US dollar, snapping its three-day rally due to forex outflows, a strong American currency and negative equity markets.
Rising crude oil prices also weighed on the domestic unit, forex traders said.
At the interbank foreign exchange, the domestic unit opened weak at 82.60 and touched the intra-day low of 82.72 against the greenback. It finally settled at 82.64 against the dollar, registering a fall of 8 paise over its previous close.
On Thursday, the rupee appreciated by 16 paise to settle at 82.56 against the US dollar, making it the third straight day of gain.
“Indian rupee depreciated on Friday on strong dollar and weak domestic markets. However, FII inflows cushioned the downside. The dollar rose on mixed to positive economic data from the US,” Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, said.
The latest US government data showed a dip in weekly unemployment claims and an increase in core durable goods orders in July over the preceding month, raising expectations of a further rate hike by the US Federal Reserve.
Investors were awaiting cues on the US Fed’s monetary policy from Chairman Jerome Powell’s speech at the Jackson Hole Symposium on Friday.
“We expect the rupee to trade with a slight negative bias on risk aversion in global markets and a strong US dollar. However, weakness in crude oil prices and inflows by foreign investors may support the rupee at lower levels,” Chaudhary said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.18 per cent to 104.17.
Global oil benchmark Brent crude futures climbed 1.39 per cent to USD 84.52 per barrel.
On the domestic equity market front, the BSE Sensex closed 365.83 points or 0.56 per cent lower at 64,886.51. The broader NSE Nifty declined 120.90 points or 0.62 per cent to 19,265.80.
Foreign institutional investors (FIIs) were net sellers in equities on Friday as they sold shares worth Rs 4,638.21 crore, according to exchange data.
Jateen Trivedi, VP Research Analyst at LKP Securities, said: “The ongoing Jackson Hole Symposium, where the Federal Reserve’s perspective on the overall economic outlook is anticipated, holds the potential to introduce new significant triggers to the market. The current strength of the dollar seems to be supported by the growing possibility of higher interest rates in upcoming meetings.” Trivedi projected the trading range for the rupee between 82.50 and 82.90.
“If the rupee manages to breach the upper range, it could potentially move towards 82.10 to 82.00. Conversely, a downward break might push the rupee towards the 83.45 mark. These levels will likely be influenced by the outcome of the Jackson Hole Symposium and any subsequent developments in the global financial landscape,” he added.
Jerome Powell at an annual conference of central bankers in Jackson Hole, Wyoming, said that the continued strength of the U.S. economy could require further interest rate increases.
He reiterated the Fed’s determination to keep its benchmark rate elevated until inflation is reduced to its 2 per cent target.
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