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Rupee declines by 9 paise to 74.71; extends losses for third day

Thu July 08 2021


Weak domestic equities weigh on forex market sentiment


Falling for the third day in a row, the rupee weakened further by 9 paise to end at 74.71 against the US currency on Thursday as weaker domestic equities weighed on forex market sentiment.


The US dollar traded strong against other Asian currencies after the minutes from the last Federal Reserve meeting indicated a tighter monetary policy ahead.


According to the minutes released on Wednesday, Federal Reserve officials discussed tapering in the recent meeting, as some members indicated that the economic recovery was proceeding faster.


However, most members agreed that the US economy had yet to meet the substantial further progress benchmark that the central bank has set for any significant change in policy. Lower crude prices, however, capped the losses in the domestic unit, forex dealers said.


At the interbank foreign exchange market, the rupee opened weak at 74.75 per dollar. It hovered in a range of 74.84 to 74.65 during the session, before ending at 74.71 against the greenback.


On Wednesday, the rupee had settled at 74.62 against the US dollar.


On the domestic equity market front, the BSE Sensex ended 485.82 points or 0.92 per cent lower at 52,568.94, while the broader NSE Nifty fell 151.75 points or 0.96 per cent to 15,727.90.


"Indian rupee in line with other Asian currencies traded lower following risk-averse sentiments. Dollar gained after FOMC minutes. US Long duration Treasury yields continued their decline with benchmark 10-year yield falling to 1.27 per cent, symbolic of a market expecting lower inflation, and slower growth, in the future," Dilip Parmar, Research Analyst, HDFC Securities, said.


However, the forex market has not followed this move, with the dollar remaining resilient, as traders focus increasingly on the likely timeline for global monetary policy normalisation, he added.


"Back home the rupee drifted lower for the third day in row, earlier crude was the reason, but this time risk-aversion was the name of the game as domestic equities lost around a percentage point in today’s trade," Parmar said.


Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, slipped 0.18 per cent to 92.47.


Brent crude futures, the global oil benchmark, fell 0.68 per cent to $72.93 per barrel.


Foreign institutional investors were net buyers in the capital market on Wednesday as they bought shares worth Rs 532.94 crore, as per exchange data.



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