The USD/INR opened 10 paise stronger at 74.26 against the U.S. currency, down from Monday’s close of 74.36. The rupee has lost over 184 paise so far this month and weakened about 26 paise in the last two trading sessions.
“For the second day in a row, the rupee continued to depreciate despite positive inflows in domestic equities. The dollar index continued to remain at elevated levels, which kept the rupee under pressure. The Dollar index gave up its early rally and move marginally lower. However, it continued to trade near 92 levels. Weakness in the Euro should keep the Dollar higher,” noted analyst at ICICI Direct.
The U.S. dollar remained on the back foot after U.S. Federal Reserve Chair Jerome Powell reaffirmed that monetary policy tightening was still some way off.
“Risk assets rebounded while DXY fell overnight on dovish Fed speaks. Fed Chair Powell said that “Fed will not raise rate preemptively… but to wait for actual evidence of inflation or other imbalances”, underscoring the intent of Average Inflation Targeting regime. Other Fed speakers also struck a dovish chord. Mester said that now is not the time to dial back accommodation and must ensure that Fed communications do not add to market volatility,” noted an analyst at Maybank.
“She also said that the discussion really should be around the asset program because that will be the first adjustment and depending on how the economy evolves before thinking about interest rates.”
But at the time of writing, the dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.14% higher at 91.875. The dollar is expected to rise further over the coming year, largely driven by the Fed’s dot plot released last week, which suggested an expectation of two rate hikes in 2023.
The Indian equity market witnessed a strong influx of retail investors, the benchmark equity indices Sensex was up 59.80 points or 0.11% at 52648.51, and the Nifty was up 20.90 points or 0.13% at 15793.70.
However, foreign institutional investors were net sellers in the capital market on Monday as they sold shares worth Rs 1,244.71 crore, as per provisional data. Global oil benchmark Brent futures rose 0.61% to $75.27 per barrel.