The Indian rupee gained a marginal rise of 1 paisa in a range-bound trade, closing at 83.11 (provisional) against the US dollar on January 25. The currency’s ascent was tempered by the support from a weakening American currency overseas, which was offset by the simultaneous surge in crude oil prices.
Rupee Gains Marginally Amidst Range-Bound Trade on January 25
Factors Influencing the Rupee Movement
Forex traders attributed the rupee’s narrow trading range to subdued domestic equities and sustained foreign fund outflows, creating a challenging environment for investors.
Intraday Fluctuations at the Interbank Foreign Exchange Market
At the interbank foreign exchange market, the rupee commenced trading at 83.13 against the greenback. Throughout the day, it oscillated between an intraday low of 83.14 and a high of 83.08, finally settling at 83.11 (provisional), marking a nominal 1 paisa increase from its previous close.
Market Recap: Wednesday’s Scenario
On the preceding day, the rupee had closed at 83.12 against the U.S. dollar. Wednesday’s trading session saw the rupee navigating a flat course amid weak domestic markets and escalating crude oil prices. The persistent foreign fund outflows also added downward pressure on the domestic currency.
Insights from Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, noted that weak domestic markets and the upward trajectory of crude oil prices contributed to the rupee’s lacklustre performance. Additionally, sustained foreign fund outflows further weighed on the Indian currency.
American Currency Trends
In contrast, the American currency traded cautiously as traders reduced their positions ahead of the release of U.S. Q4-2023 GDP data, preventing sharp gains.
Anticipated Trends and Cautionary Outlook
Choudhary expressed expectations of a slightly negative bias for the rupee, attributing it to weak domestic markets and geopolitical tensions in the Middle East. Factors such as the Red Sea issue, rising crude oil prices, and foreign investors’ selling pressure may pose challenges for the rupee.
He cautioned traders to remain vigilant ahead of key economic indicators, including GDP data, weekly unemployment claims, durable goods orders, and new home sales from the USA. Additionally, investors are advised to monitor the European Central Bank’s monetary policy decisions. Choudhary predicted that the USD/INR spot price would likely trade in a range of ₹82.90 to ₹83.50.
Global Indicators
On the global front, the dollar index, measuring the greenback’s strength against a basket of six currencies, was marginally lower at 103.17 on Wednesday. Simultaneously, Brent crude futures, the global oil benchmark, surged by 1.32% to reach $81.10 per barrel.
Domestic Equity Market Performance
In domestic equities, the Sensex saw a decline of 359.64 points (0.51%) to 70,700.67 points. The Nifty, reflecting a similar trend, fell by 101.35 points (0.47%) to 21,352.60 points.
Foreign Institutional Investors (FIIs) Activity
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, offloading shares worth ₹6,934.93 crore, according to exchange data.
In conclusion, the rupee’s marginal uptick amidst various market dynamics underscores the delicate balance in the currency’s valuation. Traders and investors are advised to navigate cautiously, considering the intricate interplay of domestic and global factors influencing the currency market.
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FAQs
- Q: What factors contributed to the rupee’s narrow trading range?
- A: Subdued domestic equities and sustained foreign fund outflows were key factors influencing the rupee’s narrow trading range.
- Q: How did the American currency trade in contrast to the rupee?
- A: The American currency traded cautiously as traders reduced their positions ahead of the release of U.S. Q4-2023 GDP data, preventing sharp gains.
- Q: What is the expected trading range for USD/INR spot price?
- A: According to Anuj Choudhary, the USD/INR spot price is expected to trade in a range of ₹82.90 to ₹83.50.
- Q: How did global indicators, such as the dollar index and Brent crude futures, perform on Wednesday?
- A: The dollar index was marginally lower at 103.17, while Brent crude futures surged by 1.32% to reach $81.10 per barrel.
- Q: What was the activity of Foreign Institutional Investors (FIIs) on Wednesday?
- A: FIIs were net sellers, offloading shares worth ₹6,934.93 crore in the capital markets on Wednesday.
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