The Indian rupee rebounded from its lowest-ever level and settled 17 paise higher at 86.53 against the US dollar on Tuesday, January 14, after the American currency retreated from a record high and the Indian equity market staged a comeback from a seven-month low. The release of India's consumer-price index (CPI)-based inflation supported the Indian currency.
However, the domestic unit still remained under pressure due to elevated crude oil prices and the continuous outflow of foreign funds. At the interbank foreign exchange, the local unit opened at 86.57 on Tuesday and hit an intra-day high of 86.45 before closing for the day at 86.53 against the US dollar, registering a gain of 17 paise from its previous close.
The rupee weakened to its all-time low on Tuesday due to strong dollar bids spurred by the maturity of positions in the non-deliverable forwards (NDF) market. The currency was under pressure throughout the session amid broad-based dollar demand prompted by maturing positions in the NDF market.
State-run banks were spotted offering dollars, most likely on behalf of the central bank, while foreign banks' dollar offers also helped limit the rupee's decline. The rupee's one-month implied volatility, a gauge of future expectations, rose to a 16-month peak of four per cent on the day.
On Monday, the rupee logged its steepest single-day fall in nearly two years and ended 66 paise at its historic low of 86.70 against the US dollar. The currency's previous record one-day fall of 68 paise was recorded on February 6, 2023.
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The unit has plunged over Re 1 in the past two weeks from the closing level of 85.52 on December 30. It had breached the 85-per-dollar mark for the first time on December 19, 2024. The local unit depreciated 18 paise to settle at 86.04 against the US dollar on Friday, a day after registering a marginal gain of five paise.
In the preceding back-to-back sessions on Tuesday and Wednesday, it plunged six paise and 17 paise, respectively. The dollar index, which gauges the greenback's strength against a basket of six currencies, traded 0.39 per cent lower at 109.38.
The global oil benchmark of Brent crude rose 0.10 per cent to $81.09 per barrel in futures trade. In the domestic equity market, the 30-share BSE Sensex climbed 169.62 points, or 0.22 per cent, to settle at 76,499.63 points, while the Nifty rose 90.10 points, or 0.39 per cent, to 23,176.05 points.
Foreign institutional investors (FIIs) offloaded equities worth ₹8,132.26 crore on Tuesday. Retail inflation, however, declined to a four-month low of 5.22 per cent in December amid an easing of prices in the food basket, giving headroom to the Reserve Bank of India (RBI) to reduce the key interest rate in upcoming monetary policy. CPI inflation eased for the second month after it breached the RBI's upper tolerance level of six per cent in October.
“Positive buying in the capital markets, particularly in PSU stocks, coupled with DII inflows over the past two days, provided minor support to the rupee," said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.
"With budget expectations building up, these factors could lend further strength. The trading range for the rupee is projected between 86.25 and 86.85, with participants focusing on domestic developments and global cues for direction,” added Trivedi.
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