New Delhi: The rupee depreciated 21 paise to 94.97 against the US dollar in early trade on Monday, weighed down by a stronger American currency in overseas markets, even as a rally in domestic equities and declining crude oil prices helped limit losses.
At the interbank foreign exchange market, the domestic currency opened at 94.90 against the dollar before weakening to 94.97, down 21 paise from its previous close.
The rupee had settled at 94.76 against the greenback on Friday.
Forex traders attributed the depreciation primarily to sustained strength in the US dollar, which continued to exert pressure on emerging market currencies.
The dollar index, which measures the greenback’s performance against a basket of six major currencies, rose 0.07 percent to 101.94.
However, softer global crude oil prices and renewed foreign institutional investment in domestic equities provided some support to the Indian currency.
“USDINR is likely to trade within 94.40–95.60 after ending October near 94.95. RBI measures and market operations have helped contain volatility, supported by reserves of around USD 720 billion,” said Anindya Banerjee, Head of Commodity and Currency Research, Kotak NEO.
Banerjee said easing crude oil prices could support the rupee, while a renewed rise in oil prices could push the dollar-rupee exchange rate towards the upper end of the projected range.
Brent crude, the global oil benchmark, declined 3.07 percent to USD 109.95 per barrel in futures trading.
Lower crude prices are generally favourable for the rupee as India depends heavily on imported oil, making the domestic currency sensitive to fluctuations in global energy prices.
A sustained decline in oil prices could help ease India’s import bill and reduce dollar demand from oil marketing companies.
Meanwhile, India’s foreign exchange reserves fell by USD 1.269 billion to USD 719.748 billion during the week ended October 30, according to Reserve Bank of India (RBI) data released on Friday.
The decline followed a USD 5.011 billion reduction in reserves during the previous reported week ended October 16, when the country’s foreign exchange holdings stood at USD 721.016 billion.
Despite the decline, the substantial reserve position continues to provide the RBI with a buffer against excessive volatility in the foreign exchange market.
On the domestic equity front, benchmark indices opened sharply higher, supported by strong corporate earnings and positive global cues.
The 30-share BSE Sensex surged 764.72 points to 75,216.80 in early trade, while the NSE Nifty advanced 201.40 points to 23,255.90.
Foreign institutional investors (FIIs) also turned net buyers, purchasing equities worth Rs 3,598.54 crore on Friday, according to exchange data.
Market participants will closely track movements in the US dollar, global crude oil prices and foreign portfolio flows for further direction in the rupee.
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