Rupee falls by 4 paise to 74.23 on fiscal concerns, strong dollar

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Mumbai, Jun 29 (PTI) The rupee weakened by 4 paise to close at 74.23 against the US currency on Tuesday due to fiscal concerns and a stronger dollar in the overseas market.

Losses in the domestic equity markets also weakened the market sentiment, analysts said.

At the interbank foreign exchange market, the rupee opened at 74.26 per dollar as against its previous close of 74.19. It hovered in the range of 74.20 to 74.28 during the day.

'Rupee depreciated amid weaker domestic equities and stronger dollar index as the Asian regional currencies once again face cases of a new variant of coronavirus and probable strict restrictions at state level,' Dilip Parmar, Research Analyst, HDFC Securities said.

The expectations of higher-than-expected fiscal deficit after the government's announcement of new relief package on Monday weighed on investor sentiment.

'Near-term momentum remains sideways with spot USDINR expected to remain in tight range of 74 to 74.50,' Parmar added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.10 per cent to 91.97.

On the domestic equity market front, the BSE Sensex ended 185.93 points or 0.35 per cent lower at 52,549.66, while the broader NSE Nifty fell 66.25 points or 0.42 per cent to 15,748.45.

Brent crude futures, the global oil benchmark, declined 0.24 per cent to USD 74.50 per barrel.

Foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 1,658.72 crore, as per exchange data.

'Rupee traded in the range near 74.20 awaiting cues from OPEC+ on crude oil production decision which can impact currencies globally. The range for rupee remains between 74.05-74.45,' said Jateen Trivedi, Senior Research Analyst at LKP Securities.

According to Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking Ltd, another crucial factor, which will weigh on the rupee, is higher crude oil prices.

'So far, the rupee has been fairly resilient to the uptick in crude oil prices, but once Brent crosses USD 80 per barrel, we believe that we may see a sharp selloff in emerging market currencies, specifically the rupee,' Sachdeva said.

Sachdeva further said that higher crude oil prices will complicate woes for the Monetary Policy Committee as they may not be able to ignore domestic inflationary pressures for long, which coupled with domestic fiscal slippage concerns will further weigh on the domestic currency.

'For now, the 72.20 mark on the rupee is sacrosanct and we may not see the rupee breaching this level any time soon. On the other hand, we are not expecting a sharp depreciation on the rupee below 75.50 levels, as the RBI’s forex buffer is quite strong. For the July-September quarter, the rupee should trade in a broad 73-75.50 band,' Sachdeva added. PTI DRR MR MR

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