A sluggish trend in domestic equities and the ongoing outflow of foreign funds are affecting investor attitudes, according to forex dealers, who also noted a bearish bias for the USD/INR pair.
The rupee began at 86.88 versus the US dollar at the interbank foreign exchange and gained 19 paise from its previous close to trade at 86.79 during early trades.
The rupee fell 10 paise versus the US dollar on Tuesday, closing at 86.98.
‘Chhatrapati Shivaji Maharaj Jayanti’ caused the FX market to be closed on Wednesday.
The US dollar index, which measures the strength of the US dollar relative to a basket of six other currencies, was down 0.16 percent at 107.
In futures trading, Brent crude, the world’s benchmark for oil, dropped 0.34 percent to USD 75.78 per barrel.
According to forex dealers, the rupee is struggling against global headwinds, but India’s economy is predicted to show significant momentum in the second half of the year.
A ‘State of the Economy’ piece in the RBI’s February bulletin states that high-frequency indicators such as automobile sales, air traffic, steel consumption, and GST E-way bills indicate a sequential increase in the momentum of economic activity during the second quarter
It further stated that a strong dollar, which is fueled by the US economy’s resiliency and changes in trade policy, may worsen capital flight from emerging markets, raise risk premiums, and increase external vulnerabilities.
CR Forex Advisors MD Amit Pabari stated
“The USD/INR pair is expected to trade within a range of 86.60–87.20. The 87.20 level is emerging as a strong resistance, while 86.50 is acting as a critical support zone, A breach below 86.50 could open up a path for 85.80-86.00 levels,”
The 30-share BSE Sensex was down 297.33 points, or 0.39 percent, at 75,641.85 points in the domestic equities market, while the Nifty was down 69.25 points, or 0.3 percent, at 22,863.65 points.
Exchange data shows that on Wednesday, foreign institutional investors sold off stocks valued at ₹1,881.30 crore on a net basis.
