Indian rupee remained weak through out the day on Wednesday and closed 25 paise down at 66.99 against the US dollar at the Interbank Foreign Exchange (Forex) market as demand for American currency rose among banks and importers amid lower domestic equity markets. The domestic currency has opened 4 paise up at 66.70 against a US dollar on Wednesday and had closed at 66.74 level on Tuesday. The domestic currency touched a high and low of 66.70 and 67.01 respectively. Domestic equity markets also closed lower tracking the global markets amid the debate on goods and services tax (GST) in Rajya Sabha. Sensex tanked 284.20 points to end at 27,697.51, while NSE Nifty settled 78.05 points down at 8,544.85. This contributed to rupee’s fall.
“Equity markets have been weak today, possibly on the back of stretched valuations and lack of any fresh positive triggers. This caused the Rupee to depreciate against the US Dollar. Over the past two days, it was demand for US Dollars from RBI that helped the currency achieve a floor and now it is demand for dollars from importers and FPIs that caused a 24/25 paise devaluation to 67.00 levels on spot. Over the near term, we see the pair forming a base between 66.50/80 levels on spot,” Anindya Banerjee, currency analyst, Kotak Securities said.
In the overseas markets, the US dollar remained lower against a basket of currencies expectations that the US Federal Reserve will raise interest rates later rather than sooner. “Probability of US rate hike is a driver of global equities and emerging market currencies as of now including in Rupee. RBI is supporting dollar/rupee at current level and it can be expected that they will not allow too much of appreciation,” Samir Lodha, MD, QuantArt Market Solutions said.
The Reserve Bank of India’s (RBI) reference rate for the dollar stood at 66.93 and for Euro stood at 74.98 on August 3, 2016. While the RBI’s reference rate for the Yen stood at 65.26, the reference rate for the Great Britain Pound (GBP) stood at 89.01.