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Rupee drops 5 paise to close at 74.24 on strong dollar.

Date: 26-08-2021
Subject: Rupee drops 5 paise to close at 74.24 on strong dollar
The rupee on Wednesday declined by 5 paise to close at 74.24 against the US currency due to a stronger dollar in the overseas markets.

Dollar demand from oil marketing companies and importers also weighed on the rupee, analysts said.

At the interbank foreign exchange market, the domestic currency opened marginally down at 74.20 and later dropped to a low of 74.30 in the day trade.

On Tuesday, the rupee had settled at 74.19 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.04 per cent higher at 92.93.

Brent crude futures, the global oil benchmark, fell 0.15 per cent to USD 70.94 per barrel.

The rupee was dragged down by dollar demand from oil marketing companies and importers, Sriram Iyer, Senior Research Analyst at Reliance Securities, said.

The unit also weakened amid talks of speculative dollar demand from foreign banks on expectations that the Reserve Bank of India could continue to build up its forex reserves, he added.

Dilip Parmar, Research Analyst, HDFC Securities, said that the forex market is in overly thin market with low volume and volatility, which may remain till Monday.

Surge in crude oil prices in the last two days also weighed on the rupee, as Brent crude oil prices rallied around 9 per cent to USD 71 per barrel mark, Parmar said.

"Rupee opened on a flat note and the currency has been very resilient to any global uncertainty in the last few sessions. Reaction on the currency has been muted despite weaker-than-expected economic numbers that were released from the US," Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services said.

Volatility is also low ahead of the important Jackson Hole Symposium, traders said. They said investors are awaiting for cues about the scaling back of the easy monetary policy by the US Federal Reserve.

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities Ltd said that volatility has become extinct in the USD-INR pair as the RBI continues to absorb dollar flows.

"Going into Jackson Hole meeting starting tomorrow evening, we expect USD-INR to remain within a range of 74.10-74.40 on spot," Banerjee said.

On the domestic equity market front, the BSE Sensex ended 14.77 points or 0.03 per cent lower at 55,944.21, while the broader NSE Nifty advanced 10.05 points or 0.06 per cent to 16,634.65.

Meanwhile, foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 1,644.91 crore, as per exchange data


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