The rupee depreciated by 5 paise to 88.75 against the US dollar in early trade on Friday, tracking a negative trend in domestic equities and foreign fund outflows.
Forex traders said investors are taking a cautious approach due to the lack of an announcement on the India-US trade deal.
At the interbank foreign exchange market, the rupee opened at 88.70 against the US dollar before dropping to 88.75, down 5 paise from its previous close.
On Thursday, the rupee settled 8 paise lower at 88.70 against the US dollar.
"Traders are perplexed by the non-announcement of the India-US trade deal despite it being very close to completion. The prolonged absence of a formal agreement has kept the rupee movement muted in the last few days," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
Bhansali further noted that the RBI has been intervening in the bond market to keep yields low and liquidity sufficient, which is also threatening the INR up move in the last few days, as the RBI continues to sell dollars to absorb the liquidity.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.04 per cent lower at 99.11.
Brent crude, the global oil benchmark, was trading 1.57 per cent higher at USD 64 per barrel in futures trade.
On the domestic equity market front, Sensex declined 284.68 points to 84,193.99 in early trade, while the Nifty dropped 88.25 points to 25,790.90.
Foreign Institutional Investors sold equities worth Rs 383.68 crore on Thursday, according to exchange data.
On the domestic macroeconomic front, Moody's Ratings on Thursday projected India's economy to grow at 7 per cent in 2025 and 6.5 per cent in the next year, supported by domestic and export diversification, amid a neutral-to-easy monetary policy stance.
Moody's, in its Global Macro Outlook, said India's economic growth is supported by robust infrastructure spending and solid consumption, although the private sector remains cautious about business capital spending.
Source Name : Economic Times