The rupee witnessed range-bound trade and depreciated 3 paise to 84.07 against the US dollar in initial deals on Wednesday, weighed down by significant foreign fund outflows and the strength of the American currency in the overseas market.
Forex traders said the rupee is likely to trade in a narrow range during the day as strong dollar and a muted tone in the domestic equities weighed on the local unit, while weak crude oil prices and any intervention by the Reserve Bank of India (RBI) may also support the local currency at lower levels.
At the interbank foreign exchange, the rupee opened at 84.03 against the greenback. In the initial trade, it touched 84.07, registering a fall of 3 paise over its previous close.
On Tuesday, the rupee witnessed a range-bound trade and appreciated 1 paisa to 84.04 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.06 per cent lower at 103.19.
According to traders, the rupee remains under intense pressure, mainly due to Foreign Institutional Investors (FIIs) offloading approximately USD 8 billion in October.
“The sell-off stems from profit-booking by FIIs, as Indian equities, after months of inflows totalling USD 25 billion, are now seen as overvalued. Adding to the pressure is the strengthening dollar index, which has surged to a two-month high of 103.25,” CR Forex Advisors MD Amit Pabari said.
Pabari further noted that despite these headwinds, the rupee’s downside seems limited, with the RBI ready to intervene if necessary.
“Globally, oil prices have dropped by 5 per cent due to weaker demand forecasts and reports that Israel is unlikely to target Iranian oil assets, easing supply concerns,” he said.
Brent crude, the global oil benchmark, rose marginally by 0.26 per cent to USD 74.44 per barrel in futures trade.
On the domestic equity market front, Sensex advanced 40.90 points, or 0.05 per cent, to 81,861.02 points. The Nifty rose 11.45 points, or 0.05 per cent, to 25,068.80 points.
Foreign institutional investors (FIIs) were net sellers in the capital markets on Tuesday, as they offloaded shares worth Rs 1,748.71 crore, according to exchange data.