Updated January 2nd, 2024 at 16:11 IST

Rupee weakens on Dollar demand from oil companies and foreign banks

Simultaneously, benchmark Indian equity indices, Sensex and Nifty, concluded in red as selling pressure emerged following their record-high levels on Monday.

Reported by: Business Desk
Rupee weakens on Dollar demand from oil companies and foreign banks | Image:Republic World
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Rupee ends lower: The Rupee closed lower on Tuesday, reflecting the broader weakness seen in Asian currencies and facing increased US Dollar demand from oil companies and foreign banks.

Closing at 83.3175, the Rupee weakened by 0.1 per cent compared to its previous session close at 83.2375. The Dollar index rose to 101.6, contributing to a retreat in Asian currencies, with the Korean won leading the losses, declining by nearly 1 per cent.

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The initial decline in the Rupee was influenced by the weakness observed in other Asian currencies. However, sustained US Dollar demand from oil companies and foreign banks continued to exert pressure on the local unit, as noted by a foreign exchange trader at a state-run bank.

Simultaneously, benchmark Indian equity indices, BSE Sensex and Nifty 50, concluded in the red as selling pressure emerged following their record-high levels on Monday.

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In December, overseas investors injected a total of $10.1 billion into Indian equities and bonds. Despite these significant inflows, the Rupee faced challenges in appreciating, possibly due to intervention by the Reserve Bank of India (RBI) to absorb the large inflows, according to traders.

However, optimistic expectations of sustained robust inflows prompted Goldman Sachs to forecast the Rupee's potential appreciation to 81 against the US Dollar over the next 12 months in a note released on Tuesday.

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Looking ahead, investors are keenly awaiting key US economic data scheduled for later in the week. The ISM manufacturing purchasing managers' index (PMI) is set to be released on Wednesday, followed by the closely-watched non-farm payroll data on Friday.

While these data releases may introduce some volatility to the market, Gaurang Somaiya, an FX analyst at Motilal Oswal Financial Services, suggests that the Rupee is unlikely to deviate significantly from its prevailing range between 83 and 83.40 in the near term.

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(With Reuters inputs,)

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Published January 2nd, 2024 at 16:10 IST