Rupee recovers from all-time low to settle 9 paise higher at 85.04 against US dollar
Mumbai, Dec 20 (PTI) The rupee saw a recovery from its all-time low level and appreciated 9 paise to close at 85.04 against the American currency on Friday, on softening of the US dollar index and a potential intervention by the Reserve Bank of India (RBI).
Forex traders said the rupee is likely to remain in a weakening mode due to significant dollar demand. The Dollar Index (DXY) is expected to remain elevated, with resistance near the 110 level in the near-term amid a reduced likelihood of significant Fed rate cuts in 2025.
The Federal Reserve cut rates by 25 basis points on Wednesday, but its forward guidance for 2025 has softened, with expectations reduced from four rate cuts to just two.
At the interbank foreign exchange, the rupee opened at 85.07 against the greenback. During the day it witnessed an intraday high of 84.95 and a low of 85.12 before ending the session at 85.04 against dollar, higher by 9 paise over its previous close.
On Thursday, the rupee depreciated 19 paise and breached the crucial 85 level to close at a fresh all-time low of 85.13 against the US dollar.
Traders said the rupee recovered from lower levels in the latter half of the day on softening of the US dollar index and a potential intervention by the Reserve Bank of India (RBI). A decline in crude oil prices also supported the rupee at lower levels.
"We expect the rupee to trade with a negative bias on weak domestic markets and overall strength in the US dollar amid a hawkish Fed and improved US economy," Anuj Choudhary – Research Analyst at Mirae Asset Sharekhan, said.
Choudhary further added that FII outflows may also weigh on the rupee. However, any intervention by the RBI or any further correction in crude oil prices may support the rupee at lower levels.
"Traders may take cues from core PCE price index, personal spending and revised consumer sentiment data from the US. USD-INR spot price is expected to trade in a range of 84.80 to 85.15," he said.
According to Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, despite the recovery, the dollar index's sustained strength continues to exert pressure on the rupee, contributing to its weakness for the fourth consecutive week.
"While today's gains provided some relief, the broader trend remains bearish. The rupee's weak trading range is projected between 84.85 and 85.15, with market participants closely watching global cues for further direction," he added.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.14 per cent at 108.26.
Brent crude, the global oil benchmark, fell 0.99 per cent to USD 72.16 per barrel in futures trade.
In the domestic equity market, the 30-share BSE Sensex closed 1,176.46 points, or 1.49 per cent, down at 78,041.59 points, while Nifty settled down 340.10 points, or 1.42 per cent to 23,611.60 points.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday, as they offloaded shares worth Rs 3,597.82 crore, according to exchange data.
The latest RBI data on Friday showed India's forex reserves dropped by USD 1.988 billion to USD 652.869 billion for the week ended December 13. In the preceding week, the overall reserves had dropped by USD 3.235 billion to USD 654.857 billion. PTI