The rupee declined by 22 paise to close at 79.96 against the US dollar on Wednesday, tracking the strength of the American currency in the overseas markets and a muted trend in domestic equities. Forex traders said investors are awaiting the US Fed's policy decision on interest rates for further cues. Moreover, risk-off mood and firm crude oil prices weighed on the local unit. Forex traders said investors are awaiting the US Fed's policy decision on interest rates for further cues.
At the interbank foreign exchange market, the domestic currency opened at 79.81 per dollar. It hovered in a range of 79.79 to 80.01 during the session. The rupee finally settled at 79.96, down 22 paise over its previous close. On Tuesday, the rupee had closed 7 paise higher at 79.74. The rupee finally settled at 79.96, down 22 paise over its previous close.
"The dollar appreciated against major currencies ahead of an expected interest rate hike by the Federal Reserve and as Russia's escalation of war enervated investors' appetite for risk," said Dilip Parmar, Research Analyst, HDFC Securities. With a third 75-basis-point rate hike by the Federal Open Market Committee widely expected, some investors have moved to price in an even larger increase, Parmar said.
The market participants were fretful after Russian President Vladimir Putin announced a "partial mobilisation" of troops in Ukraine. "Spot USD-INR is placed at the upper band of the range and sustainable trade above 80 would open 80.70 in the near term while the support will shift to 79.25," Parmar added.
In August, the rupee had fallen to its all-time low of 80.15 against the US dollar. "Rupee continued to consolidate in a narrow range ahead of the FOMC policy statement. The expectation is that the central bank could raise rates by another 75bps," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. "Rupee continued to consolidate in a narrow range ahead of the FOMC policy statement.
The US Dollar extended gains against its major crosses after Russian President Vladimir Putin announced partial military mobilization. The greenback rose following uncertainty in the market. "Focus is primarily on the US Fed meeting and could influence the currency. We expect the USDINR(Spot) to trade sideways and quote in the range of 79.50 and 80.20," Somaiya added.
According to Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas, said, "We expect Rupee to trade with a negative bias amid deteriorating global risk sentiments post-Russian President's address to the nation and expectations of a hawkish US Federal Reserve." Investors may also take cues from existing home sales data which is expected weaker than the previous reading. USDINR spot price is expected to trade in a range of 79.20-81 in the next couple of sessions. Investors may also take cues from existing home sales data which is expected weaker than the previous reading.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.31 per cent higher at 110.55. Brent crude futures, the global oil benchmark, fell by 2.36 per cent to USD 92.76 per barrel.