Amid US-China tensions, rupee slips by 5 paise to 75.76 against dollar
The rupee on Thursday (May 28) declined by 5 paise to settle at 75.76 against the US currency as escalating tension between the US and China boosted the demand for the dollar. Forex traders said the rupee traded in a narrow range as a flare-up in the US-China tensions and losses in Asian currencies weighed on the local unit despite gains in equities market.
At the interbank forex market, the rupee opened weak at 75.90 but pared most of the initial losses to settle at 75.76 against the US dollar, down 5 paise over its last close. The local unit moved in a range of 75.69 to 75.90 in day trade. It had settled at 75.71 against the US dollar on Wednesday. Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 334.74 crore on Wednesday, according to provisional exchange data.
“Souring relations between the two economic powerhouses the US and China due to the trade-related issues, coronavirus origin and now because of Chinas crackdown on Hong Kong are leading to safe-haven flows towards the dollar,” Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking, said. Market participants were also cautious ahead of the release of key macro data on Friday, dealers said.
The dollar index, which gauges the greenbacks strength against a basket of six currencies, rose by 0.02 per cent to 99.07. The US and China clashed over Hong Kong at the UN Security Council, with Washington calling a meeting over the controversial national security law introduced by Beijing to tighten its control on the former British colony.
“Volatility in the rupee was confined to a narrow range despite a sharp surge in domestic equities and weakness in the dollar against its major crosses. Market participants remained cautious ahead of the GDP number that will be released tomorrow,” said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services. “We expect that uncertainty related to Hong Kong issue and tensions brewing between the US and China could attract safe-haven buying in the greenback, he said further.
According to Devarsh Vakil, Head Advisory, HDFC Securities Indian rupee fell for the second day amid weaker Asian currencies. “So far this month, the rupee has been stable against the dollar and consolidated in range of 75 to 76, mainly on the back of dollar inflows and higher domestic equities,” he noted. Meanwhile, the 30-share BSE Sensex rallied 595.37 points or 1.88 per cent to finish at 32,200.59 on Thursday.
The broader NSE Nifty climbed 175.15 points or 1.88 per cent to 9,490.10. Brent crude futures fell 1.24 per cent to USD 34.31 per barrel. Meanwhile, in India, the death toll due to COVID-19 rose to 4,531 and the number of cases climbed to over 1.58 lakh in the country, according to the Health Ministry. The number of cases around the world linked to the disease has crossed over 57.16 lakh and the death toll has topped 3.56 lakh.
The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.6476 and for rupee/euro at 82.9173. The reference rate for rupee/British pound was fixed at 93.2175 and for rupee/100 Japanese yen at 70.34.