The rupee failed to sustain its gaining momentum and fell 5 paise to 87.11 against the US dollar in early trade on Thursday as a lower American currency and crude oil prices failed to boost sentiment amid volatile equity markets and foreign funds outflow.
The local currency found support initially amid the US move to delay implementation of higher tariffs on Canada and Mexico, forex traders said. Also, RBI’s decision to infuse ₹1.9 lakh crore liquidity into the banking system added strength to the domestic unit. However, they said, volatile equity markets played a spoilsport and pushed back the local unit to the negative territory.
At the interbank foreign exchange, the rupee opened stronger at 86.96, went up to 86.88 but soon pared most of its gains and traded at 87.11 against the greenback, registering a loss of 5 paise from its previous closing level.
The rupee settled 13 paise higher at 87.06 against the US dollar on Wednesday, the third straight day of gain. In the preceding two sessions, the unit had gained 18 paise.
- Also read: Weekly Rupee View: Rupee may see limited upside
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading marginally higher by 0.05 per cent at 104.30.
Brent crude, the global oil benchmark, rose 0.58 per cent but stayed lower at $69.70 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex was trading 20.53 points, or 0.03 per cent, lower at 73,709.70 points, while the Nifty was down 10.75 points, or 0.05 per cent, at 22,326.55 points.
Foreign institutional investors (FIIs) offloaded equities worth ₹2,895.04 crore on net basis on Wednesday, according to exchange data.
The Reserve Bank on Wednesday said it will conduct open market purchases of government securities and undertake USD/INR swaps totalling about ₹1.9 lakh crore during the month.
On February 28, the central bank conducted US dollar-rupee swap worth $10 billion to inject long-term liquidity into the system, with the auction eliciting robust demand.
On the domestic macroeconomic front, India’s services sector activity witnessed a sharp uptick in February boosted by improving domestic and international demand, which resulted in a quicker expansion in output and a substantial increase in employment, a monthly survey said on Wednesday.
The seasonally adjusted HSBC India Services PMI Business Activity Index rose from January’s 26-month low of 56.5 to 59.0 in February, indicating a sharp pace of expansion.
US President Donald Trump has granted a one-month exemption on his stiff new tariffs on imports from Mexico and Canada for US automakers amid concerns that the newly launched trade war could crush domestic manufacturing. The pause came a day after Trump spoke with leaders of the ‘big 3’ automakers, Ford, General Motors and Stellantis.
