Indian Rupee: Likely To Extend Weakness

7 Apr 2022 , 08:45 AM

The Indian rupee is likely to extend weakness against the dollar in opening trades on Thursday, 07 April 2022 tracking strength in dollar overseas. Expectations of rate hikes by the U.S. Fed to rein in decades-high inflation are keeping the dollar index buoyant, a key headwind for the Indian rupee. Meanwhile, investors are awaiting the RBIs policy decision on Friday amid expectations that the central bank might retain status quo on interest rate.

On Wednesday, rupee snapped its three-day winning streak falling 47 paise to close at 75.76 against the U.S. dollar. At the interbank foreign exchange market, the rupee opened at 75.50 against the American currency but lost ground and settled at 75.76, down 47 paise from the previous close. On Tuesday, the rupee had climbed 24 paise to close at 75.29 against the U.S. dollar.

Domestic benchmark indices ended a volatile session with deep losses on Wednesday. Negative global cues triggered profit selling in large caps. However, small and mid-caps stocks witnessed buying. The S&P BSE Sensex fell 566.09 points or 0.94% at 59,610.59. The Nifty 50 index shed 149.75 points or 0.83% at 17,807.75. Foreign portfolio investors (FPIs) sold shares worth Rs 2,279.97 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 622.92 crore in the Indian equity market on 6 April, provisional data showed.

Overseas, most Asian stocks declined Thursday following two days of declines on Wall Street. US stock indexes fell for a second day as investors reacted to Fed guidance on tightening monetary policy. The Feds release of its meeting minutes indicated on Wednesday afternoon that officials ?generally agreed? it should shrink its balance sheet by $95 billion per month. The minutes also showed central bank officials were considering larger rate hikes than the usual 25-basis-point, or quarter-point, increments.

Meanwhile, the dollar hovered near a two-year high against a basket of currencies on Thursday, after meeting minutes showed the Federal Reserve preparing to move aggressively to head off inflation. The U.S. dollar index, which measures the greenback against six majors, touched its highest since May 2020 overnight at 99.778 and held nearby at 99.575 in early Asia trade.

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