USD/INR: Rupee Opens Higher for Second Straight Day, Gains 5 Paise In Early Trade

The Indian rupee opened higher for the second straight day, appreciating by over 5 paise against the U.S. dollar in an early trade Tuesday, helped by a subdued greenback which took a breather after last week’s U.S. jobs data.

Investors will watch minutes from the Fed’s latest meeting – due on Wednesday – after the Fed brought forward its policy tightening timeline and surprised markets last month.

The dollar to rupee conversion today fell to 74.2475 against the U.S. currency, down from Monday’s close of 74.3. The rupee has lost over 170 paise in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 8 paise so far in this month.

“After six days of continuous fall, the rupee managed to recover and appreciated almost 44 paise to close at 74.30 levels in the previous session. The Dollar index remained marginally below its recent two-month high post unemployment data. We continue to feel the Dollar index would remain in a range before making a directional move from here,” noted analysts at ICICI Direct.

“The USD to INR reverted from its sizeable Call base of 75. We feel it is likely to trade in a range as no major moves are expected from the Dollar index due to the holiday season. The dollar to rupee July contract on the NSE was at 74.48 in the last session. The open interest fell 4% for the July series.”

It is worth noting that sustained foreign fund outflows, higher oil prices, and firm U.S. dollar will continue to weigh on the rupee.

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.07% lower at 92.150 – pulling back from three-month highs as rate hikes bets ebbed.

But the world’s dominant reserve currency, the USD, is expected to rise over the coming year, largely driven by the Fed’s dot plot released last week, which suggested an expectation of two rate hikes in 2023.

A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to INR pair higher.

It is worth noting that the U.S. markets were closed on Monday in observation of Independence Day.

The benchmark equity indices BSE Sensex was trading 79.56 points or 0.16% higher at 52,958.20, while the broader NSE Nifty advanced 35.70 points or 0.23% to 15,870.35.

However, foreign institutional investors were net sellers in the capital market on Monday as they offloaded shares worth Rs 338.0 crore, as per exchange data. Global oil benchmark Brent futures rose 0.43% to $77.49 per barrel.