Rupee opens flat on Wednesday at ₹82.72 against US dollar

The Indian rupee is expected to fall further in Wednesday’s trading session after the Chinese yuan fell to a new six-month low against the US dollar.

Non-deliverable forwards predict that the rupee would open slightly lower than 82.71 in the previous session.

On concerns about the growth forecast, the offshore Chinese yuan fell 0.4% to 7.1180 per US dollar, its lowest level since November 2022.

Data showed that China’s manufacturing activity declined quicker than predicted in May due to decreasing demand, causing Asian and US equity futures to fall. Shares in Hong Kong and China fell by roughly 2% and 1%, respectively.

In May, the yuan is down 2.8% against the dollar. The overall strength of the dollar has also contributed to the Chinese currency’s depreciation.

The dollar index is up 2.6% this month, boosted by forecasts of another rate hike by the Federal Reserve of the United States, and investors are rethinking the likelihood of rate reduction this year.

The Indian rupee closed 8 paise lower versus the US dollar on Tuesday, despite overall strength in the US currency. The local currency lost 8 paise during the day to settle at 82.71 against the previous close of 82.63 a dollar.

“We expect Rupee to trade with a slight negative bias in the near term on strong Dollar and expectations of a 25-bps rate hike by US Federal Reserve. However, improved global risk sentiments may prevent sharp downside in Rupee and may also dent safe haven appeal for Dollar. Any intervention by the central bank may also support Rupee. Investors may remain cautious ahead of India’s fiscal deficit, GDP and manufacturing PMI data. Traders may also remain cautious ahead of from ISM manufacturing PMI and non-farm payrolls from US this week. We expect USDINR spot to trade in between 82.20 to 83.20 in the near term,” said Anuj Choudhary – Research Analyst, Sharekhan by BNP Paribas.

On Tuesday, foreign institutional investors (FIIs) extended their purchase to approximately ₹2,086 crore. Domestic institutional investors (DIIs) on the other hand, snapped their seven-day winning streak and turned net sellers, with an outflow of about 439 crore. Despite a tumultuous performance, the Sensex ended near the psychological 63,000 barrier, and the Nifty 50 reached over 18,630 levels. Overall, the markets did favourably.

Oil prices fell over 2% on May 30 as fears about the US debt ceiling agreement dampened the market’s risk-on mood, while confusing messages from Saudi Arabia and Russia at the OPEC+ meeting on June 4 kept analysts and investors on their toes.

Brent crude futures dropped $1.36, or 1.8%, to $75.71 a barrel. West Texas Intermediate (WTI) crude in the United States fell $1.19, or 1.6%, from Friday’s closing to $71.48 per barrel. Because of the Memorial Day holiday in the United States, there was no settlement on Monday.

(With inputs from Reuters)

Updated: 31 May 2023, 09:08 AM IST