The Indian rupee opened lower for a second straight day, depreciating by over 19 paise against the U.S. dollar in early trade Thursday as the greenback traded near its highest in the last three months after the Fed minutes reaffirmed taper timeline.
“Among EM currencies, the rupee remained one of the underperformers and again depreciated against the dollar. It ended at 74.62 levels, down almost 8 paise. The dollar index rallied to a three-month high. Signs of strength in the US labour market supported gains. May JOLTS job openings rose to a record,” noted analysts at ICICI Direct.
“The USD to INR pair saw fresh accumulation from lower levels along with the Dollar Index moving to fresh three month’s high indicating a move towards 75 cannot be ruled out. The dollar to rupee July contract on the NSE was at 74.82 in the last session. The open interest rose 1.5% for the July series.”
The dollar to rupee conversion today rose to 74.81 against the U.S. currency, up from Wednesday’s close of 74.615. 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 more than 42 paise so far in this month.
The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.12% higher at 92.752 – close to its three-month high of 92.844. That was largely driven by the minutes of the Federal Reserve’s June policy meeting which reaffirmed that the U.S. central bank to continue to make progress in scaling back its massive asset purchases as soon as this year.
The world’s dominant reserve currency, the USD, is expected to rise further over the coming year, largely driven by the Fed’s 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.
Global oil benchmark Brent futures traded 0.03% lower at $73.41 per barrel at the time of writing. On Tuesday, oil prices spiked to a three-year high of $77.84 per barrel as OPEC+ failed to reach an agreement. Higher oil prices would push up the inflation expectations and widen India’s trade deficit, which could hurt the Indian rupee.
The benchmark equity indices BSE Sensex was trading 70 points or 0.12% lower at 52,987.06, while the broader NSE Nifty traded 27.25 points or 0.17% lower at 15,849.90. Foreign institutional investors were net buyers in the capital market on Wednesday as they purchased shares worth Rs 532.94 crore, as per exchange data.
This article was originally posted on FX Empire