The Indian rupee slipped against the U.S. dollar for the second straight day on Wednesday amid weakness in domestic equity markets, which fell from record highs due to losses in energy and financial stocks.
The USD/INR rose to an intraday high of 73.0150 against the U.S. currency from Tuesday’s close of 72.95. The dollar index, a measurement of the dollar’s value relative to six foreign currencies, fell 0.09% to 89.99.
The Indian equity markets erased their early morning gains and settled lower on Wednesday, largely due to losses in Financial and Auto sector stocks. The benchmark BSE Sensex index fell 333.93 points or 0.64% to 51,941.64, while the Nifty-50 dipped 104.70 points 0.67% to 15,635.40.
On the other hand, the global oil benchmark Brent futures rose 0.51% to $72.59 per barrel. Foreign institutional investors were net buyers in the capital market on Tuesday as they purchased shares worth Rs 1,422.71 crore, as per exchange data.
“Indian Rupee is expected to trade with negative bias on risk aversion in the domestic markets, strong dollar and surge in crude oil prices. Additionally, Reserve Bank of India kept its interest rates unchanged for the sixth consecutive monetary policies meet and downgraded its outlook on economy. Further, traders will remain cautious ahead of macroeconomic data, inflation data from US and outcome of Major Central Banks monetary policies around the globe,” noted analysts at Sharekhan.
“However, sharp downside in Rupee may be prevented as number of COVID-19 cases in India continued to decline. India reported daily new COVID-19 cases below 1 lakh. In India number of COVID-19 cases exceeded 2.9Cr and deaths more than 3.51L. USDINR spot expected to trade in a range between 72.75 on lower side to 73.25 on higher side with upward trend.”
The Indian rupee was one of Asia’s best performers, having risen 2.3% in May, but lost ground last week, its biggest decline in six weeks. The USD/INR is expected to rise about 2% to INR 74.00 against the U.S. dollar rate over the coming year, up from INR 72.00 seen on Monday.