Rupee rises 17 paise to close at 81.81 against US dollar on forex inflows

MUMBAI: The rupee appreciated by 17 paise to close at 81.81 against the US dollar on Monday as a sharp jump in India's forex reserves boosted investor sentiment.

At the interbank foreign exchange market, the local unit opened at 82 against the US dollar and moved in a range of 81.81 to 82.04 in day trade.

The rupee closed 17 paise higher at the day's high of 81.81 against the previous close of 81.98 on Friday.

The Indian rupee gained on softening crude oil prices and a sharp jump in India''s forex reserves, said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

The Indian rupee appreciated following corporate dollar inflows while the dollar index traded higher after depressing flash PMI numbers from European countries, said Dilip Parmar, Research Analyst, HDFC Securities.

The local unit has settled at its strongest level since July 3. The sentiment remains favourable for the rupee amid better macro environments and dollar inflows.

Near-term support is located at 81.76 and resistance is located at 82.25 for spot USDINR.

India's forex reserves swelled by USD 12.743 billion to USD 609.022 billion in the week ended July 14, the Reserve Bank of India said on Friday.

The overall reserves had dropped by USD 2.901 billion to USD 593.198 billion in the previous reporting week.

In October 2021, the country''s forex reserve had reached an all-time high of USD 645 billion. The reserves have been declining as the central bank deploys the kitty to defend the rupee amid pressures caused majorly by global developments.

However, a weak tone in the domestic markets and a strong US Dollar capped sharp gains. The US Dollar gained amid disappointing PMI data from Europe and the UK which showed activity contracting deeper, Choudhary said.

According to Jateen Trivedi, VP Research Analyst at LKP Securities, the rupee showed a positive rally, moving from a low of 82.04 to a high of 81.81, buoyed by the anticipation of a positive outcome in the upcoming US interest rate policy on Wednesday evening.

Currently, the rupee is expected to trade within the range of 81.75 to 82.25 until the policy is released. Price action may be observed between 81.70 and 82.25, and a breach on either side could indicate a fresh trend for the rupee, Trivedi said.

The market is likely to experience volatility due to strong data lined up ahead, including the FED policy on Wednesday evening and GDP data on Thursday evening, which may lead to data-specific rallies with gaps on the next day, Trivedi added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.19 per cent to 101.26.

Brent crude futures, the global oil benchmark, advanced 0.74 per cent to USD 81.67 per barrel.

''We expect the rupee to trade with a slight negative bias on deteriorating global risk sentiments which may support the safe-haven US Dollar and put pressure on riskier currencies,'' Choudhary said.

Choudhary further said that ''risk aversion in global markets and rising concerns over global economic slowdown may also weigh on the rupee.

''However, sustained foreign inflows may support rupee at lower levels. Investors may remain cautious ahead of the FOMC meeting later this week. We expect the USD/INR spot to trade in the range of 81.50 to 82.40 in the near term''.

On the domestic equity market front, the 30-share BSE Sensex closed 299.48 points or 0.45 per cent lower at 66,384.78. The broader NSE Nifty fell 72.65 points or 0.37 per cent to 19,672.35.

Foreign institutional investors (FIIs) were net sellers in the capital market on Monday as they offloaded shares worth Rs 82.96 crore, according to exchange data.