Why The Rupee Fell To 89.98 Against The Dollar Despite Rising Forex Reserves
Forex traders said persistent capital withdrawals from foreign investors, alongside heightened dollar demand from importers, dented investor sentiments.
The rupee depreciated eight paise to close at 89.98 (provisional) against the US dollar on Monday, weighed down by foreign fund outflows and a negative trend in domestic equities.
Forex traders said persistent capital withdrawals from foreign investors, alongside heightened dollar demand from importers, dented investor sentiments.
At the interbank foreign exchange, the local unit opened at 89.95 against the dollar and touched an intra-day low of 89.99 and a high of 89.88.
At the end of Monday's trading session, the rupee was quoted at 89.98 (provisional) against the greenback.
On Friday, the rupee depreciated 19 paise to close at 89.90 against the US dollar.
"Traders may watch out for Federal Open Market Committee (FOMC) minutes and core PCE (Personal Consumption Expenditures) price index data from the US this week. USDINR spot price is expected to trade in a range of 89.60 to 90.20," said Anuj Choudhary, Research Analyst, Mirae Asset ShareKhan.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading marginally higher by 0.02 per cent at 98.03, as most markets are in a holiday mood and trading volumes are thin, limiting big moves and keeping the DXY range-bound.
Brent crude, the global oil benchmark, was trading 1.48 per cent higher at USD 61.54 per barrel in futures trade, amid thin year-end trading and ongoing concerns about global demand.
Forex traders said the USD/INR pair is trading under pressure due to multiple factors, including a shift toward risk aversion, driven by persistent capital withdrawals from foreign investors ahead of the holiday break, alongside heightened greenback demand from importers.
Meanwhile, External Affairs Ministry spokesperson Randhir Jaiswal has said that India and the US remain engaged in concluding a fair, balanced and mutually beneficial bilateral trade agreement.
On the domestic equity market front, the 30-share sensitive index Sensex declined 345.91 points to settle at 84,695.54, while the Nifty was down 100.20 points to 25,942.10.
Foreign institutional investors offloaded equities worth Rs 317.56 crore on Friday, according to exchange data.
Meanwhile, India's forex reserves jumped USD 4.368 billion to USD 693.318 billion during the week ended December 19, the Reserve Bank said on Friday.
The overall kitty had increased USD 1.689 billion to USD 688.949 billion in the previous week.
(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)
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