Mumbai: The rupee pared its initial gains to close marginally down by 1 paisa at 74.88 against the US dollar on Tuesday due to worries that the alarming surge in COVID-19 cases could derail the economic recovery in the country. An increase in crude oil prices and losses in the domestic equity markets also weighed on the local unit.
At the interbank forex market, the domestic unit opened at 74.65 against the US dollar, but lost ground to touch the day's low level of 74.98. The rupee finally closed at 74.88 against the US dollar, down by 1 paisa over the previous close. "Indian Rupee depreciated amid a surge in crude oil prices and a decline in domestic markets. Further, the rupee slipped on concern that rising COVID-19 cases in India and lockdown restriction in some states may hurt the economic recovery," said Saif Mukadam, Research Analyst, Sharekhan by BNP Paribas.
Mukadam further noted that sharp fall was prevented on weakness in the dollar and as the Indian government announced next phase of COVID-19 vaccination. Everyone above the age of 18 will be eligible to get the Covid vaccine from May 1. Lingering concerns over the economic impact of surging coronavirus infections offset the impact of a broad dollar decline, Sriram Iyer, Senior Research Analyst at Reliance Securities, said. "The major driver to the rupee's outlook in the coming days could rest on the economic impact of the current coronavirus wave in the country and how soon the vaccine rollouts occur," Iyer said. Mukadam said the rupee may trade in the range of 74.40 to 75.35 in the next couple of sessions. India's total tally of COVID-19 cases climbed to 1,53,21,089 with 2,59,170 new coronavirus infections being reported in a day, while active cases surpassed the 20-lakh mark, according to the Union Health Ministry data updated on Tuesday. Registering a steady increase for the 41st day in a row, the active cases increased to 20,31,977, comprising 13.26 per cent of the total infections, while the national COVID-19 recovery rate has dropped to 85.56 per cent.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.04 per cent to 91.03. On the domestic equity market front, the 30-share BSE benchmark Sensex ended 243.62 points or 0.51 per cent lower at 47,705.80 and broader NSE Nifty fell 63.05 points or 0.44 per cent to 14,296.40. Foreign institutional investors were net sellers in the capital market on Monday as they sold shares worth Rs 1,633.70 crore, as per exchange data. Brent crude futures, the global oil benchmark, advanced 0.88 per cent to USD 67.64 per barrel. Asian currencies were stronger this Tuesday tracking the broad decline in the dollar and lent support. "Rupee trades volatile in range of 74.50-75.00 amid the uncertainty on who will have upper hand in coming times, COVID-19 or COVID-19 vaccines. The first is spreading rapidly in India & the other is being jabbed as fast as possible to neutralize the virus. This is impacting the rupee, hence volatile sessions are being witnessed," said Jateen Trivedi, Senior Research Analyst at LKP Securities.