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Rupee Drops by 7 Paise to 73.61 Against US Currency Due to Dollar Purchases by State-run Banks

A man reacts as he looks at a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. (File photo/Reuters)

A man reacts as he looks at a screen displaying the Sensex results on the facade of the Bombay Stock Exchange (BSE) building in Mumbai. (File photo/Reuters)

At the interbank forex market, the local unit opened weak at 73.62 against the US dollar and remained under pressure for the most part of the session. It moved in a range of 73.46 to 73.67 against the US dollar in day trade.

The rupee depreciated by 7 paise to close at 73.61 against the US dollar on Friday due to dollar buying by banks possibly on the behalf of the Reserve Bank. At the interbank forex market, the local unit opened weak at 73.62 against the US dollar and remained under pressure for the most part of the session. It moved in a range of 73.46 to 73.67 against the US dollar in day trade.

The local had settled at 73.54 against the greenback in the previous session on Thursday. "The Indian rupee ended weak against the US Dollar on Friday and posted its worst weekly decline against the US currency in six weeks on persistent dollar purchases by state-run banks to offset the impact of robust foreign inflows," Sriram Iyer, Senior Research Analyst at Reliance Securities, said.

The rupee dropped by 26 paise or 0.35 per cent this week, its third weekly decline in a row. Iyer said that risk appetite waned amid uncertainty over the timing of the fiscal stimulus in the US.

"Indian rupee underperformed among Asian peers amid dollar buying from foreign banks and importers. Central bank's aggressive dollar buying has capped the gains in rupee," Devarsh Vakil, Deputy Head Retail Research, HDFC Securities, said. The Reserve Bank of India has bought USD 9 billion in the first two weeks of the current month as per the weekly forex reserve data.

"While on the inflow front, foreign institutions have bought worth USD 2 billion equities in secondary market in October month," Vakil said. Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services said, "As we get close to the US election day, uncertainty over the outcome will keep USD-INR spot afloat. We expect 73.40 to act as an immediate support, only a break will weigh towards 73.20 zone, while, 73.90-74 will act as an immediate resistance." On the domestic equity market front, the BSE benchmark Sensex settled 127.01 points or 0.31 per cent higher at 40,685.50 and the broader NSE Nifty rose 33.90 points or 0.28 per cent to end 11,930.35.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.21 per cent lower at 92.75. Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,118.46 crore on Thursday, according to exchange data.

Brent crude futures, the global oil benchmark, rose 0.28 per cent to USD 42.34 per barrel. In the US, positive economic data supported dollar bulls – jobless claims fell and previously owned home sales rose to a 14-year high. Talks in Washington on a fresh coronavirus fiscal relief package dragged on, but House Speaker Nancy Pelosi said Democrats and the Trump administration were on the verge of an agreement, Vakil said.

first published:October 23, 2020, 20:04 IST
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