Indian Rupee: Weak Dollar Could Lend Support

Indian Rupee: Weak Dollar Could Lend Support

Dec 01, 2020 03:12 IST capital market

The Indian rupee is expected to stay cautious in opening trades on Tuesday, December 1, 2020 after having dropped lower against the dollar last weekend. Markets were closed on Monday, 30 November 2020 on account of Gurunanak Jayanti. The country technically entered recession after GDP came by a negative 7.5% in July-September quarter amid COVID crisis. However, a weak greenback overseas is likely to support.

On Friday, rupee snapped its five-day winning streak to finish 17 paise lower at 74.05 against the US dollar. The domestic unit opened at 73.80 against the greenback and witnessed an intra-day high of 73.76 and a low of 74.07. The local unit finally closed at 74.05 against the American currency, registering a loss of 17 paise over its previous close. On a weekly basis, the rupee gained 11 paise.

The National Statistical Office (NSO) released the estimates of Gross Domestic Product (GDP) in the July-September period. Provisional estimates of gross domestic product for the second quarter of the year ending in March 2021 show economic output shrank by 7.5%, following the 23.9% contraction in the first quarter. Indias eight core industries growth for October was at -2.5%. The September growth number has been revised to -0.1% from -0.8% earlier.

Domestic equity indices ended a volatile session with small losses on Friday. The barometer index, the S&P BSE Sensex fell 110.02 points or 0.25% at 44,149.72. The Nifty 50 index declined 18.05 points or 0.14% at 12,968.95. Foreign portfolio investors (FPIs) bought shares worth Rs 7,712.98 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 4,968.90 crore in the Indian equity market on 27 November, provisional data showed.

Overseas, most Asian stocks are trading higher as investors react to the release of a private survey of Chinas manufacturing activity. In US, stocks dipped on Monday as the prospect of a vaccine-driven economic recovery and further central bank stimulus measures eclipsed immediate concerns about the spiking coronavirus pandemic. Moderna Inc on November 30 applied for U.S. emergency authorization for its COVID-19 vaccine after full results from a late-stage study showed it was 94.1% effective with no serious safety concerns.

Meanwhile, the dollar was down on Tuesday morning in Asia, starting the new month on a lower note even after closing its worst month since July in November. Giving the dollar a boost, however, was the expectation of more monetary easing measures from the U.S. Federal Reserve. The U.S. Dollar Index Futures that tracks the greenback against a basket of other currencies edged down 0.12% to 91.903.

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