The rupee ended weaker by 9 paise at 84.89 (provisional) against the greenback on Monday on the back of weak domestic stocks and higher US bond yields. Nevertheless, some forex traders said that a delicate greenback partly offset the effect of these factors.
On the interbank foreign exchange market, the rupee started at 84.83 & ranged from 84.83 to 84.89 and then finally closed at what was the lowest level of 84.89 against the dollar. This was lower than the earlier record low of 84.88 achieved on December 12. On Friday, however, the rupee had somewhat recovered to its earlier decline, strengthening by 8 paise to end at 84.80.
The rupee has further depreciated against the dollar due to fears of negative signs in domestic equity markets and an increase in US bond yields, which boosted the dollar’s value. Still, some observers think that despite potential selling from individuals and portfolio investors, FII can stabilize and even support the rupee at slightly lower levels in the coming weeks because of a declining inflation trend.
In the domestic market, WPI-based inflation came down to a three-month low of 1.89 % in November due to cut down in prices of food items. At the same time, the international economy indicated contradictory tendencies. The dollar index that shows the greenback’s performance against a basket of half a dozen currencies declined a tad, 0.14% to 106.85. Futures Brent crude oil also fell by 0.78 percent to $ 73.91 per barrel.
Equities domestically showed heavy selling pressure, with the Sensex ending down by 384.55 points or 0.47 percent lower at 81,748.57. Likewise, the Nifty fell to 24,668.25, a decline of 100.05 (0.4%). On the positive side, FIIs were net buyers in the capital markets on Friday, with a net investment of ₹2,335.32 crore, as per the data available with the exchanges.
This mixed economic environment, even to date, affects the outlook of the rupee to the benchmark foreign currencies.
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