Mumbai: The rupee declined by 12 paise to close at 79.74 against the US dollar on Friday, tracking a strong American currency in the overseas market and rising crude oil prices.
Strong demand for the dollar from oil importers and concerns over trade deficit also weighed on the local unit. However, heavy foreign fund inflows into equities cushioned the rupee from a major fall.
At the interbank foreign exchange market, the local currency opened at 79.67 and saw an intra-day high of 79.63 and a low of 79.74 against the American currency.
It finally ended at the day’s low of 79.74, down 12 paise over its previous close.
“Indian rupee underperformed among Asian currencies in the holiday-truncated week amid dollar demand-supply mismatch and higher crude oil prices,” said Dilip Parmar, Research Analyst, HDFC Securities.
Softer-than-expected US inflation data this week has lifted the risk assets around the world, especially in emerging market space. However, the rupee was unable to encash the opportunity rather it depreciated following high importers’ dollar demand, Parmar said.
Going ahead, market participants waiting for inflation and industrial output data ahead of the holiday-shortened next week.
“Spot USDINR is expected to trade in the range of 78.85 to 79.90, while the medium-term bias remains bullish as long as it trades above 78.50,” Parmar added.
Trade data released on Friday showed that the trade deficit widened to USD 30 billion in July due to a spike in crude oil imports.
Retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank’s comfort level of 6 per cent for the seventh consecutive month.
Industrial production grew in double digit for the second month in a row at 12.3 per cent in June mainly due to strong performance by manufacturing, power and mining sectors, official data released after market hours showed.
Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas said, “We expect Rupee to trade on a mixed to negative note. Positive US Dollar and recovery in crude oil prices may mount downside pressure on Rupee while rise in risk appetite in global markets may support Rupee at lower levels.”
Choudhary further said that USDINR spot price is expected to trade in a range of Rs 78.50 to Rs 80.50 in next couple of sessions.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.26 per cent to 105.36.
Brent crude futures, the global oil benchmark, advanced 0.55 per cent to USD 100.15 per barrel.
On the domestic equity market front, the BSE Sensex ended 130.18 points or 0.22 per cent higher at 59,462.78 points, while the broader NSE Nifty advanced 39.15 points or 0.22 per cent to 17,698.15 points.
Foreign institutional investors remained net buyers in the capital market on Friday as they purchased shares worth Rs 3,040.46 crore, as per exchange data.