Rupee drops by 16 paise to over 1-month low on strong dollar demand

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Mumbai, Oct 28 (PTI) The rupee depreciated by 16 paise to settle at more than one-month low of 73.87 against the US currency on Wednesday due to month-end dollar demand from importers and the greenback's gains against major currencies.

Losses in domestic stock markets and uncertainty ahead of expected fresh stimulus measures also weighed on the investor sentiment.

At the interbank forex market, the rupee opened on a positive note at 73.70 against the greenback, but soon pared gains to touch an intra-day low of 73.93. The local unit finally settled at 73.87, registering a decline of 16 paise over its previous close of 73.71. This is the lowest closing level since September 24 when the rupee had settled at 73.89.

'Indian rupee fell along with other Asian currencies following risk-off sentiments. Hopes of government decision to introduce more stimulus before the Diwali festival capped the rise,' said Devarsh Vakil, Deputy Head Retail Research, HDFC Securities.

The dollar is strong versus major peers on month-end portfolio rebalancing, with investors focusing on the next week's US presidential election and the global rise in virus infections, he added. 'The toxic brew of no US fiscal stimulus and rapidly rising coronavirus cases are dwindling market sentiments, especially ahead of the US election event risk,' said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further said that the spot is not breaking the psychological level 74 but the odds of spot going beyond 74 remains high as market volatility has started to rise.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.41 per cent to 93.31.

On the domestic equity market front, the 30-share BSE benchmark Sensex ended 599.64 points or 1.48 per cent lower at 39,922.46. The broader NSE tanked 159.80 points or 1.34 per cent to close at 11,729.60.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 3,514.89 crore on Tuesday, according to exchange data.

Brent crude futures, the global oil benchmark, fell 3.16 per cent to USD 39.30 per barrel. According to Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services: 'Market participants are now waiting for more clarity on the stimulus package which is under consideration for quite some time now. For the next couple of sessions, we expect the rupee to quote with a negative bias and quote in the range of 73.40 and 74.05.' 'The Indian rupee depreciated against the dollar as risk appetite waned following another wave of coronavirus infections in the US and Europe,' said Sriram Iyer, Senior Research Analyst at Reliance Securities.

Moreover, greenback purchases by state-run banks, likely on behalf of importers also weighed on the local unit, Iyer said adding that uncertainty over the outcome of the US Presidential election and U.S. stimulus impasse also weighed on the domestic unit.

Investors trod with caution amid concerns about presidential elections.

'Opinion polls predict that Democratic presidential nominee Joe Biden will be victorious in the election. However, traders are cautious because similar predictions about Hillary Clinton proved to be wrong in 2016,' Ankit Agarwal Managing Director, Alankit Limited said. PTI DRR MR