Rupee drops by 6 paise to 74.94 as COVID caseload surges

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Mumbai, Apr 22 (PTI) The rupee weakened further by 6 paise to close at 74.94 against the US dollar on Thursday as a persistent rise in COVID-19 cases and enhanced restrictions imposed by states weighed on investor sentiment.

Increased concerns over forex outflows weighed on the local unit, analysts said.

At the interbank forex market, the local unit opened sharply lower at 75.25 against the greenback and traded in the range of 74.82 to 75.26 during the day. On Tuesday, the rupee had settled down at 74.88 against the American currency.

Forex and equity markets were closed on Wednesday on account of 'Ram Navami'.

Sriram Iyer, Senior Research Analyst at Reliance Securities, said that the rupee depreciated against the US Dollar as an alarming surge in coronavirus infections raised risks to the country's near-term growth outlook and increased concerns about foreign fund outflows.

However, likely intervention from the Reserve Bank of India trimmed losses in the unit and kept volatility in check, Iyer added.

India registered over 3.14 lakh new coronavirus cases in a day, the highest-ever single-day count recorded in any country, taking the total tally of COVID-19 cases in the country to 1,59,30,965.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.07 per cent to 91.09. Brent crude futures, the global oil benchmark, were trading 0.54 per cent down at USD 64.97 per barrel.

On the domestic equity market front, the BSE Sensex ended 374.87 points or 0.79 per cent higher at 48,080.67, while the broader NSE Nifty advanced 109.75 points or 0.77 per cent to 14,406.15.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,082.33 crore on Tuesday, as per provisional data. 'Indian rupee erased early morning loss and ended with minor depreciation following rebound in domestic equities. Risk-on sentiments, lower dollar index and dollar selling by exporters and central bank’s supported rupee in Thursday's session,' said Dilip Parmar, Research Analyst, HDFC Securities.

However, the trend for rupee remains on the downside as domestic macro environments getting weaker with rising infections, short term consolidation cannot be ruled out after recent sell-off, Parmar noted.

'Rupee after opening lower against the US dollar rose in the latter half following suspected RBI intervention and gains in domestic equities,' said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

In the last few sessions, the reaction of the rupee has been determined by the increasing number of COVID cases in India. Announcements of stricter restrictions by many states have disturbed the overall market sentiment. PTI DRR MR