Snapping a three day recovery streak, the rupee dropped 36 paise to 73.93 against US dollar in early trade Monday, amid rising global crude oil prices and weak macro economic data. Coupled with this, a rise in dollar demand from importers and sustained foreign fund outflows weighed on the domestic currency. Factors like the dollar’s strength against some other currencies overseas and a volatile opening of the equity markets also impacted the domestic currency, PTI reported dealers as saying.
Taking stock of rupee’s movement on Monday, Bhavik Patel, Senior Technical Analyst, Tradebulls Securities said that the rupee gave up its 3 day recovery streak as dollar strengthened against pound and Euro, as ahead of key European Summit as investors are preferring safe haven currencies like Dollar. “Besides Crude prices also rose on Friday and are back above $81.40 which is bearish for Indian currency. Statement from US Treasury Secretary Mnuchin on Saturday that Washington wants to include a provision to deter currency manipulation in future trade deals, including with Japan triggered sell off in emerging market currencies and traders rushed to buy US dollar. On Technical levels, we expect USDINR to retrace till 73.70 before resuming its upward journey of 74.50 and above,” Patel told FE Online.
Earlier on Friday, the rupee also staged a smart comeback and closed 55 paise higher at 73.56 against the dollar. “The rupee marked first weekly gains in seven weeks buoyed by the government’s decision to raise import duties by up to 20 per cent on telecom equipment and components. It sought to reduce the dependence on imported goods in a sector with burgeoning demand, which could outstrip the value of oil imports in the coming years,” V K Sharma, Head PCG & Capital Markets, HDFC Securities noted on Friday.
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Notably, industrial production slipped to a three-month low of 4.3% in August and retail inflation rose marginally to 3.77% in September, according Central Statistics Office data released on Friday. Even as India Inc reports Q2 earnings, Prashant Jain of HDFC AMC told FE Online that the ongoing rupee depreciation will boost earnings, and will boost Nifty EPS.