Forex traders said the rupee witnessed high volatility as the support from positive domestic equities and foreign fund inflows was negated by risk-off sentiments among investors.
Illustration: Dominic Xavier/Rediff
Key Points
- Rupee’s early gains hit a roadblock
- Rupee remains sensitive to persistent capital outflows
- FPIs continue to recalibrate their Indian exposure
The rupee witnessed a volatile trading session and settled for the day on a slightly lower note, down 1 paisa at 90.66 against the US dollar on Monday, as traders assessed the details of the India-US interim trade framework.
Forex traders said the rupee witnessed high volatility as the support from positive domestic equities and foreign fund inflows was negated by risk-off sentiments among investors.
How the rupee moved on Monday
At the interbank foreign exchange market, the rupee opened at 90.66 against the US dollar, then gained some ground to touch 90.37, registering a gain of 28 paise over its previous close.
It, however, erased the gains and touched an intra-day low 90.77.
At the end of Monday’s trading session, the rupee was quoted at 90.66, down 1 paise from its previous close.
On Friday, the rupee declined 31 paise to settle at 90.65 against the US dollar.
Framework for trade deal
India and the US on Saturday announced that they have reached a framework for an interim trade agreement under which both sides will reduce import duties on a number of goods to boost two-way trade.
While the US will reduce tariffs on Indian goods to 18 per cent from the present 50 per cent, India will eliminate or cut down import duties on all US industrial goods and a wide range of American food and agricultural products, including dried distillers’ grains, red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits.
According to a joint statement issued by both sides, India has expressed its intention to purchase $500 billion of US energy products, aircraft and aircraft parts, precious metals, technology products and coking coal over the next five years.
“The rupee’s early gains hit a roadblock as a sharp rebound in precious metal prices stoked higher dollar demand from importers.
“Despite a recent recovery in global risk appetite following the Indo-US trade deal, the currency remains sensitive to persistent capital outflows, as foreign portfolio investors continue to recalibrate their Indian exposure,” Dilip Parmar, Research Analyst, HDFC Securities, said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.05 per cent lower at 97.58.
Brent crude, the global oil benchmark, was trading 1.04 per cent lower at $67.34 per barrel in futures trade.
On the domestic equity market front, Sensex jumped 485.35 points to settle at 84,065.75, while the Nifty advanced 173.60 points to 25,867.30.
Foreign Institutional Investors purchased equities worth Rs 2,254.64 crore on Monday, according to exchange data.
Meanwhile, India’s forex reserves jumped by another $14.361 billion to a new all-time high of $723.774 billion during the week ended January 30, the Reserve Bank said on Friday.
In the previous reporting week, the forex kitty had increased by $8.053 billion to $709.413 billion, surging past the earlier all-time high of $704.89 billion recorded in September 2024.
