Mumbai, May 27 (PTI) The rupee retreated from a two-day surge and depreciated 30 paise to settle at 85.40 against the US dollar on Tuesday, tracking a recovery in American currency index, negative domestic equity market and muted foreign fund inflows.
According to forex traders, the dollar strengthened against major currencies and this recovery was fueled by a rebound in US bonds.
Moreover, investors also moved cautiously awaiting domestic industrial and manufacturing production data for April as well as the first quarter GDP growth numbers to be released this week.
At the interbank foreign exchange, the domestic unit opened at 85.15 and moved between the high of 85.11 and the low of 85.45 against the greenback during intraday trade. The unit settled at 85.40 against the dollar, registering a loss of 30 paise over its previous close.
On Monday, the rupee closed 35 paise higher at 85.10 against the greenback, after gaining 50 paise in the preceding session on Friday.
“The Indian rupee weakened, retreating from a two-day surge, as the dollar strengthened against major currencies. This dollar recovery was fueled by a rebound in US bonds, which in turn was prompted by indications from Japan that it is considering a reduction in its bond issuance,” said Dilip Parmar – Senior Research Analyst, HDFC Securities.
In the near-term, the spot USDINR pair is anticipated to rise incrementally due to month-end adjustments and demand from oil importers, Parmar said, adding that the pair faces resistance at 85.90 and has support at 84.80.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.51 per cent at 99.43.
Brent crude, the global oil benchmark, fell 0.83 per cent to USD 64.20 per barrel in futures trade.
Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, said the rupee fell on weak domestic equities and positive US dollar index. Muted foreign inflows also weighed on the rupee.
“Month-end dollar demand from importers may also pressurise the domestic unit. However, overall weakness in the US dollar index and improved global risk sentiments may support the rupee. USD-INR spot price is expected to trade in a range of 85 to 85.70,” he added.
In the domestic equity market, the 30-share BSE Sensex tumbled 624.82 points, or 0.76 per cent, to close at 81,551.63, while the Nifty tanked 174.95 points, or 0.70 per cent, to 24,826.20.
Foreign institutional investors (FIIs) purchased equities worth Rs 348.45 crore on a net basis on Tuesday, according to exchange data.
