Rupee Drops 5 Paise Amid Negative Equities and Dollar Demand

The rupee settled 5 paise lower at 83.18 against the US dollar on Tuesday due to negative domestic equity trends and demand from importers. Elevated crude oil prices weighed on investor sentiment, while foreign investor buying provided some support. The currency traded within a narrow range throughout the day.

The rupee pared initial gains to settle 5 paise lower at 83.18 against the US dollar on Tuesday amid a negative trend in domestic equities and some dollar demand from importers.

Forex traders said the rupee consolidated in a narrow range as elevated crude oil prices weighed on investor sentiment, while the decline in the US dollar cushioned the downside..

Foreign investors were also net buyers in the equity markets on Tuesday which cushioned the currency from a major fall, dealers said..

At the interbank foreign exchange market, the local unit opened at 83.14 and touched an intra-day high of 83.10 and a low of 83.19 later in the day.

The domestic unit finally settled at 83.18, down 5 paise from its previous close.

On Monday, the rupee pared its initial gains and settled for the day lower by 3 paise at 83.13 against the US dollar.

''We expect the rupee to trade with a slight positive bias as strength in the domestic markets and expectations of fresh foreign inflows may support the rupee,'' said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.

Softening of the US Dollar may also support the local unit. However, a rise in crude oil prices may cap sharp upside.

''Investors may remain cautious ahead of core PCE price index data later this week. USDINR spot price is expected to trade in a range of Rs 82.90 to Rs 83.50,'' Choudhary added.

''The rupee fell to 83.19 as oil companies bought dollars after the swift rise to 83.03 levels. The rupee is expected to trade in a range of 83 to 83.30 on Wednesday as we await for the US FED speakers and the personal consumption expenditures price index, or PCE, data,'' Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP, said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading at 104.47, lower by 0.12 per cent, as investors trimmed their positions ahead of inflation data.

Brent crude futures, the global oil benchmark, rose 0.18 per cent to USD 83.25 per barrel.

On the domestic equity market, the 30-share BSE Sensex declined 220.05 points, or 0.29 per cent, to close at 75,170.45 points. The broader NSE Nifty fell 44.30 points, or 0.19 per cent, to close at 22,888.15 points.

Foreign Institutional Investors (FIIs) turned net buyers in the capital markets on Tuesday, with purchases worth Rs 65.57 crore on a net basis, according to exchange data.