Mumbai: The rupee on Thursday declined by 10 paise to settle at a 16-month low of 75.60 against the US dollar amid foreign fund outflows from equities and a firm greenback in the overseas markets.
Besides, concerns over the impact of new COVID variant on the global economy also weighed on investor sentiments, traders said.
At the interbank foreign exchange market, the local currency opened at 75.45 against the greenback. The local unit soon pared its initial gains and touched a low of 75.60 against the US dollar.
The rupee finally settled at its day’s low of 75.60, down by 10 paise over its previous close. Previously, the rupee had closed at this level on July 1, 2020.
On Wednesday, the Indian rupee fell to a near two-month low of 75.50 against the US dollar, as RBI’s bi-monthly monetary policy decision failed to enthuse forex market participants.
“The Indian Rupee ended weaker against the US Dollar on Thursday on concerns about persistent foreign outflows from local equities and as oil prices extended their climb,” Sriram Iyer, Senior Research Analyst at Reliance Securities said.
Currently foreign investors are net sellers of Indian equities in all trading sessions since November 18, and have withdrawn almost USD 5 billion during this period, Iyer said.
Meanwhile, oil prices were lifted by optimism that the Omicron mutation might not have a significant impact on oil demand.
The Reserve Bank of India on Wednesday kept borrowing costs at a record-low for the ninth consecutive time, as it decided to continue supporting economic growth amid uncertainty over the impact of the Omicron strain on the economy.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.20 per cent up at 96.08.
Brent crude futures, the global oil benchmark, declined 0.46 per cent to USD 75.47 per barrel.
Foreign institutional investors were net sellers in the capital market on Wednesday as they offloaded shares worth Rs 579.27 crore, as per exchange data.
“Rupee consolidated in a narrow range despite gains in the dollar against its major crosses. In line with expectation, the RBI held rates unchanged and maintained its stance accommodative. RBI said that it would endeavour to broaden growth impulses, encourage credit flow to productive sectors,” said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.
From the US, market participants will be a little cautious ahead of the important inflation number that will be released on Friday.
“At the same time, consumer sentiment numbers will be released from the US and better-than-estimated data could extend gains for the dollar. We expect the USDINR (spot) to trade sideways with a positive bias and quote in the range of 75.05 and 75.80,” Somaiyaa said.