Rupee slips 12 paise against US dollar in early trade

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Updated: July 5, 2018 10:35:52 AM

The continuous outflow of foreign funds, along with a lower opening in the domestic stock markets, affected the rupee which fell by 12 paise to a low of 68.86 against the greenback in early trade on Thursday.

RUPEE, INFLATIONIn early trade, the rupee fell by 12 paise to a low of 68.86 against the greenback.

Amid continuous outflow of foreign funds, a lower opening in the domestic stock markets along with concerns on heightened inflation after MSP hike for kharif crops by the government, weighed on the rupee which slipped by 12 paise in early trade on Thursday. Also, a strong US dollar on the back of increased demand for the currency affected the movement of the rupee. In early trade, the rupee fell by 12 paise to a low of 68.86 against the greenback.

“INR needs fundamental reasons to halt the slide but unfortunately there aren’t any. Strong dollar coupled with currency outflow from capital market is making difficult for our currency to hold on to its gain against USD,” Bhavik Patel, Senior Technical Analyst, Tradebulls Securities, told FE Online. “We expect USDINR Fut to depreciate further till 69.10-69.30 within couple of trading session. Any pullback will only come if USDINR Fut manages to dive below 68.50 levels.”

Provisional data from the stock exchanges show that foreign institutional investors (FIIs) have pulled out funds worth Rs 1,327.89 crore during July 3-4, while domestic institutional investors (DIIs) have infused Rs 889.85 crore. “Outflows been happening since February this year,” Hiren Sharma, Founder and Managing Partner at Portia Advisory Services LLP, told FE Online. “Today USDINR is likely to remain in the range of 68.54 (stretched 68.35) to 69.07 (stretched 69.40). Today’s price is primarily coming from MSP being raised and its possible impact on inflation and thereby rate hike(s). Hence, we see mute or low equity markets until now today.”

“Also, crude prices remain elevated, and usual dollar purchases will keep the rupee weaker. Any progress in equities and dollar receding (further) can assist the rupee. Careful positions will be taken before U.S. non-farm payroll data (due tomorrow),” Sharma added.

In the domestic equity markets, the BSE Sensex fell by 47 points to a low of 35,598.06 points in opening trade on Thursday following subdued Asian peers. Crude oil prices fell on Thursday after U.S. President Donald Trump sent a harsh tweet accusing the Organization of Petroleum Exporting Countries (OPEC) of driving up fuel prices and demanding a cut, according to a Reuters report.

Rupee to weaken further?

On Wednesday, the rupee closed 17 paise lower at 68.74 against the US dollar. “Recovery in Indian rupee proved short-lived as yesterday, in spite of opening higher, rupee failed to hold 68.70 levels in futures and ended weakening by 0.13 paisa. Dollar Index (DXY) is consolidating between 94.10-94.60,” Patel told FE Online.

“On Tuesday, Indian Rupee strengthened on the back of Euro strength. Euro recovered its losses as the leading coalition parties in Germany managed on Monday to break the migration deadlock. This calmed the nerves of investors but the broader trend of Indian rupee weakening against US dollar continues,” he added.

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