On May 15, the Rupee marginally appreciated by one paisa, closing at 83.50 (provisional) against the U.S. dollar, benefiting from a retreat in the American currency from its recent highs. Nonetheless, persistent foreign fund outflows and a downward trajectory in domestic equities exerted pressure on the local currency.
Forex traders anticipate the USD/INR pair to maintain a relatively stable range with a slight bias towards weakness, attributed to foreign investors' preference for the U.S. dollar and the Reserve Bank of India's ongoing selling of the greenback.
At the interbank foreign exchange market, the local unit commenced trading at 83.49. Throughout the session, it maintained a narrow trading band, fluctuating between 83.51 and 83.47. Eventually, the domestic currency settled at 83.50 (provisional), registering a modest uptick of one paisa from its previous close.
Rupee falls 2 paise to close at 83.50 (provisional) against US dollar
— Press Trust of India (@PTI_News) May 10, 2024
The Rupee's ascent was fueled by the weakening U.S. Dollar. However, gains were tempered by subdued domestic markets and selling pressure from Foreign Institutional Investors (FIIs), remarked Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
"We anticipate the Rupee to exhibit a slight bearish bias due to the weakened U.S. Dollar and expectations of its potential resurgence amid persistent inflation concerns and robust retail sales," stated Mr. Choudhary. Additionally, he highlighted that FII outflows and an increase in crude oil prices could further burden the Rupee.
Mr. Choudhary also noted that market participants would closely monitor India's trade balance data, as well as CPI and retail sales figures from the U.S. Based on these factors, he projected the USD-INR spot price to fluctuate within the range of ₹83.30 to ₹83.80.
"Although internal factors momentarily weigh on the rupee, external circumstances are now favorable. Recent U.S. CPI and retail sales data suggest a renewed downturn in inflation," commented Amit Pabari, Managing Director of CR Forex Advisors.
India's trade and currency update: April 2024
According to government data released on May 15, India's merchandise exports for April 2024 saw a slight uptick, reaching $34.99 billion compared to $34.62 billion in the corresponding month of the previous year.
Similarly, imports experienced an increase, rising to $54.09 billion from $49.06 billion recorded in April 2023. Consequently, the trade deficit for the month widened to $19.1 billion, reflecting the variance between imports and exports.
Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six major currencies, dipped slightly to 104.85, marking a 0.15% decline. This movement came as Federal Reserve Chair Jerome Powell downplayed the significance of the recent PPI data, particularly after the revision of March's figures downwards.
On the commodities front, Brent crude futures, the global oil benchmark, edged up by 0.18%, reaching $82.53 per barrel.
#Rupee Climbs 3 Paise, Closing at 83.43 Against #USDollar Despite Market Volatility.
— AlgoBulls🇮🇳📊 (@AlgoBulls) May 3, 2024
Forex traders noted that the currency's ascent was tempered by significant selling pressure in the domestic equity market, coupled with the outflow of foreign funds.https://t.co/TF4yiR85oJ
Market recap: Sensex, Nifty dip
In the realm of domestic equities, the 30-share BSE Sensex experienced a decline of 117.58 points or 0.16%, ultimately closing at 72,987.03 points. Similarly, the broader NSE Nifty saw a slight downturn, settling 17.30 points or 0.08% lower at 22,200.55 points.
According to exchange data, Foreign Institutional Investors (FIIs) emerged as net sellers in the capital markets on May 14, offloading shares valued at ₹4,065.52 crore.
Shifting focus to macroeconomic indicators, wholesale inflation surged to a 13-month high, reaching 1.26% in April, driven primarily by escalating prices of food articles, notably vegetables. This trend arises amidst expectations of the Reserve Bank of India maintaining interest rates during the upcoming policy review next month.
Meanwhile, Moody's Ratings forecasted on Tuesday that the Indian economy is poised to expand by 6.6% in the current fiscal year. Furthermore, they emphasized that robust economic growth fueling strong credit demand will underpin the profitability of the Non-Banking Financial Companies (NBFC) sector.