The rupee’s initial gains on Monday were offset by strong demand for the US dollar among importers and outflows from domestic equities, leading to a flat close against the greenback. The local currency settled at 83.90 per dollar after opening at 83.81, tracking a fall in the dollar index.
The dollar index fell to 100.78 on Monday, its lowest since July 19, 2023, down from 101.44 on Friday. The dollar index measures the strength of the greenback against a basket of six major currencies.
“Indian rupee fell after rising to Rs 83.81 per dollar as importers came in hordes to buy dollars, though it only went up to 83.92 per dollar,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Market participants said that the Reserve Bank of India’s intervention through dollar buys further weighed on the rupee during the day.
“The rupee is being pressured because of outflows, and I don’t find any issue with the depreciation because it was long overdue. The RBI has been supporting on both sides, and now it’s time to find new levels,” said the treasury head at a private bank.
Domestic equities witnessed outflows of around $2 billion in August so far.
Among all the Asian currencies, only the Indian rupee and the Bangladesh Taka depreciated against the greenback in August so far. The rupee depreciated by 0.2 per cent against the dollar, while the Bangladesh Taka depreciated by 1.5 per cent in the same period.
On the other hand, government bond yields softened marginally after Federal Reserve chair Jerome Powell said that the time has come to cut interest rates. However, the gains were limited due to the lack of any indication of rate cuts on the domestic front.
The yield on the benchmark 10-year government bond settled at 6.85 per cent, down from 6.86 per cent on Friday.
“There are dovish comments coming from the US, but on the domestic front, the RBI still remains hawkish,” said a dealer at a primary dealership. “The current range will be maintained unless we get clarity on a domestic rate cut,” he added.
Traders now eye the US GDP data on Thursday and US PCE prices data on Friday for further cues.
First Published: Aug 26 2024 | 6:22 PM IS