The local unit traded within an intra-day range between 95.20 and 95.38 as a firm dollar index offset positive momentum from foreign capital inflows. Brent crude dropped over one percent, which cushioned the currency alongside net domestic stock purchases of Rs 871.83 crore by foreign institutional investors. Market participants are monitoring upcoming US GDP and core PCE price index figures, as well as European Central Bank decisions, for broader policy cues.
Key points
Strong domestic equity market performance and retreating crude oil prices served as prima…: Strong domestic equity market performance and retreating crude oil prices served as primary buffers against steep currency depreciation.
Federal Reserve policy stances and greenback strength continue to impose downward pressur…: Federal Reserve policy stances and greenback strength continue to impose downward pressure on emerging market currencies like the rupee.
Analysts anticipate the currency will fluctuate between 94.5 and 95.50 against the greenb…: Analysts anticipate the currency will fluctuate between 94.5 and 95.50 against the greenback amid US-Iran diplomatic developments and December rate hike expectations.
Sources checked by our analysis pipeline: 1
Forex traders said the rupee fell to a two-week low on a strong dollar and a slightly hawkish Fed. However, positive domestic markets and softening of crude oil prices cushioned the downside.
In the interbank foreign exchange market, the rupee opened at 95.20 against the dollar, then lost ground to touch an intra-day low of 95.38 and finally settled for the day at 95.25 (provisional), registering a gain of 3 paise over its previous close.
On Wednesday, the rupee depreciated 21 paise to close at 95.28 against the US dollar.
"We expect the rupee to trade with a slight negative bias on a hawkish Fed and a strong dollar. Expectations of a rate hike by the Fed in December may further strengthen the dollar," said Anuj Choudhary, Research Analyst, Mirae Asset Sharekhan.
However, softening of crude oil prices and optimism over diplomatic talks between the US and Iran may also support the rupee at lower levels.
"Traders may take cues from GDP and core PCE price index data from the US. Investors will also watch out for the ECB's monetary…
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