Mumbai: The rupee pared early losses to close almost flat at 82.61 against the US dollar on Friday as the greenback retreated from the day’s high after fresh data suggested the US labour market may be cooling off due to high interest rates.
Continued foreign fund inflows into equities also helped the rupee recover from early losses, analysts said.
The rupee opened lower at 82.68 and later fell further to a day’s low of 82.75 with deepening losses in equities led by profit-taking by domestic institutional investors. DIIs sold shares worth Rs 2,964.23 crore on a net basis on Friday after a record rally in benchmark indices.
However, the local unit regained some ground on weakness in the dollar against major world currencies and finally settled at 82.61, showing a loss of 1 paisa over the last close.
On Thursday, the rupee had settled at 82.60 against the dollar.
The rupee depreciated on a weak tone in domestic markets and a rise in crude oil prices. The surge in short-term bond yields in the US and the UK amid a hawkish tone of the central banks also put pressure on the rupee, said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
However, the soft US dollar prevented a sharp fall. Most economic data releases from the US were stronger than forecast.
“We expect the rupee to trade with a negative bias on risk aversion in global markets and rising bond yields. However, sustained FII inflows may support rupee at lower levels,” Choudhary said.
Market participants may remain cautious ahead of US non-farm payrolls, unemployment rate and hourly earnings data.
“A strong labour market would reinforce expectations of a rate hike by the FOMC in July. We expect the USDINR spot to trade between 82.30 to 83.30 in the near term,” Choudhary added.
The Indian rupee marked the largest weekly decline after December 9, amid strong dollar demand from the importers and risk-averse sentiments, said Dilip Parmar, Research Analyst, HDFC Securities.
“Back home the monsoon is progressing very well but the recent surge in vegetable and spices prices will be reflected in next week’s inflation number,” Parmar said.
In the near-term, spot USDINR has psychological resistance at 83 and support at 82.50. The bias has turned bullish after a recent surge in the pair, Parmar added.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, declined by 0.80 per cent to 102.34.
Brent crude futures, the global oil benchmark, advanced 0.59 per cent to USD 76.97 per barrel.
On the domestic equity market front, the 30-share BSE Sensex closed 505.19 points or 0.77 per cent lower at 65,280.45 points. The broader NSE Nifty declined 165.50 points or 0.85 per cent at 19,331.80 points.
Foreign institutional investors (FIIs) were net buyers in the capital markets on Friday as they purchased shares worth Rs 790.40 crore, according to exchange data.
