Rupee gains 8 paise against US dollar on Budget day

The rupee appreciated 8 paise to close at 81.80 against the US dollar on Wednesday after Finance Minister Nirmala Sitharaman presented the Union Budget for 2023-24.

Fresh foreign capital inflows supported the domestic unit, forex traders said.

However, investors stayed cautious ahead of the outcome of the US Federal Reserve meeting later in the evening, they added.

At the interbank foreign exchange market, the rupee opened at 81.76 against the greenback and finally settled at 81.80, up 8 paise over its previous close.

During the session, the rupee touched an intraday high of 81.68 and a low of 82.03 against the American currency.

On Tuesday, the rupee depreciated by 36 paise to close at a three-week low of 81.88 against the US dollar after the Economic Survey 2022-23 said the domestic unit may remain under pressure on account of plateauing of exports and subsequent widening of the current account deficit.

Sitharaman in her Budget speech retained the country's fiscal deficit target of 6.4 pc in the Revised Estimate for FY23 and cut it to 5.9 per cent for FY24.

She said that the fiscal deficit is to be brought down to below 4.5 pc by 2025-26.

''It was a reformist budget which also focused on fiscal consolidation and simplification of tax laws. However, FPI continued to sell Indian stocks and portfolio reallocation continued from India to China,'' Anindya Banerjee, VP - Currency Derivatives & Interest Rate Derivatives at Kotak Securities said.

Banerjee further added that now all eyes are on the US Fed meeting. ''Market expects a 25 bps hike but focus will be on their guidance. We expect volatility to continue but USD/INR remains well supported near 81.50. A broad range of 81.50 and 82.50 can be seen over the near term''.

''This led to some strengthening of the Rupee earlier in the day,'' said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

The government's fiscal deficit as of December-end touched 59.8 per cent of the full-year Budget Estimate on subdued growth in revenue collections, according to finance ministry data released on Tuesday.

''Soft Dollar and a fiscally prudent budget may prevent a sharp fall in the Rupee. Market participants may remain cautious ahead of ISM manufacturing PMI, JOLTS job openings and FOMC meeting outcome,'' Choudhary said, adding that the Fed is expected to hike interest rates by 25 bps.

India's manufacturing sector activity moderated in January amid a slower increase in total sales, and headcounts were broadly unchanged amid sufficient staff numbers to cope with current requirements, according to a monthly survey.

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) fell from December's recent high of 57.8 to 55.4 in January, as factory orders and production rose at a slower pace.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.14 per cent lower at 101.95.

Global oil benchmark Brent crude futures declined 0.26 per cent to USD 85.24 per barrel.

The 30-share BSE Sensex ended 187.31 points or 0.31 per cent higher at 59,708.08, while the broader NSE Nifty declined 45.85 points or 0.26 per cent to 17,616.30.

Foreign Institutional Investors (FIIs) were net buyers in the capital market on Wednesday as they bought shares worth Rs 1,785.21 crore, according to exchange data. In second half rupee fell from highs of 81.70 to 82.00 with focus now on US FED's policy meeting update in which 0.25 bps is already priced in, any different number shall add pressure on rupee as dollar will be seen higher, Even a hawkish tone shall keep rupee under some pressure,'' said Jateen Trivedi, VP Research Analyst at LKP Securities.

Trivedi further noted that the rupee range can be seen between 81.60 - 82.35.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)