Rupee drops 9 paise to 75.60 on weak economic data, COVID concerns

Mumbai, Jul 1 (PTI) The rupee on Wednesday settled 9 paise lower at 75.60 against the US currency due to dollar buying by oil importers and concerns over rising COVID-19 cases.

Foreign fund outflows and firming crude oil prices weighed on the local unit, forex traders said.

At the interbank forex market, the rupee opened higher at 75.49 against the US dollar. The unit later lost ground to end at the day's low level of 75.60 against the US dollar, down 9 paise over its last close.

It had settled at 75.51 against the US dollar on Tuesday.

'Rupee ended lower on Wednesday on weakening risk appetite amid rising COVID-19 cases across the world, while dollar demand from oil importers further aided dollar buying,' said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.

Poor risk appetite due to rising coronavirus cases helped dollar demand in the market, he said.

The number of cases around the world linked to the disease has crossed 1.04 crore and the death toll has topped 5.11 lakh. In India, the death toll due to COVID-19 rose to 17,400 and the number of infections rose to 5,85,493, according to the health ministry.

Brent crude futures, the global oil benchmark, rose 2.64 per cent to USD 42.36 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.14 per cent to 97.25.

'The mixed risk sentiments are leading to a very lacklustre trading in the forex market. Traders are unaware of which direction will the USD/INR spot trade and are looking for more cues,' said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further said that 'the good news of economic recovery has been factored in so any disappointment over coronavirus or US-China trade war will hamper the market sentiments.' Meanwhile, the headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) stood at 47.2 in June, up from 30.8 in May. Despite the rise, the Indian manufacturing sector activity contracted for the third straight month in June.

'Amid the softening dollar environment, risk assets remain largely supported, following decent gains made in Asian and early trend in European markets,' said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.

On the domestic equity market front, after hitting a high of 35,467.23, the 30-share BSE index settled 498.65 points, or 1.43 per cent, higher at 35,414.45. The NSE Nifty surged 127.95 points, or 1.24 per cent, to 10,430.05.

Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 2,000.08 crore on Tuesday, according to provisional exchange data.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.5270 and for rupee/euro at 84.6658. The reference rate for rupee/British pound was fixed at 92.6892 and for rupee/100 Japanese yen at 70.15. PTI DRR ANS MR