Indian Rupee: Dollar Strength Could Weigh

8 Aug 2022 , 08:50 AM

Dollar extending weekend strength to Monday is likely to add pressure on the Indian rupee in opening trades although sustained foreign fund inflows coupled with lower crude oil prices is expected to support the domestic unit. The Reserve Bank on Friday raised the key interest rate — the third straight increase since May — in an effort to cool stubbornly high inflation and defend the rupee. The repurchase rate was raised by 50 basis points to lift the interest rate to the pre-pandemic level. The 5.40 per cent repo rate was last seen in August 2019. On Friday, rupee appreciated by 17 paise to close at 79.23 against the US dollar after the Reserve Bank hiked interest rates by 50 basis points. At the interbank foreign exchange market, the domestic currency opened at 79.15 per dollar. It hovered in a range of 78.94 to 79.29 during the session. The domestic unit finally settled at 79.23, up 17 paise over its previous close of 79.40. The dollar index that measures the greenback against a basket of currencies surged to 106.93 after the release of the non-farm payroll data, and is currently quoting at 106.48. The headline equity indices ended with small gains on Friday. Weak European shares put pressure on domestic shares. The barometer index, the S&P BSE Sensex, rose 89.13 points or 0.15% to 58,387.93. The Nifty 50 index gained 15.50 points or 0.09% to 17,397.50. Foreign portfolio investors (FPIs) bought shares worth Rs 1,605.81 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 495.94 crore in the Indian equity market on 5 August, provisional data showed. Overseas, Asian stocks are trading lower Monday, with SoftBank set to report earnings after the market close. US stocks ended mixed on Friday after a solid jobs report torpedoed recent optimism that the Federal Reserve might let up its aggressive campaign to reign in decades-high inflation. Powered by Commodity Insights