Indian Rupee: Likely To Stay Supported

3 Feb 2022 , 09:01 AM

The Indian rupee is likely to stay supported on Thursday, 03 February 2022 tracking weakness in the dollar overseas after disappointing private sector employment data. Fed officials this week also backtracked on some of the central banks hawkish comments, pushing the dollar lower. However, sustained foreign fund outflows and higher crude oil prices may continue to weigh.

On Wednesday, rupee pared its initial gains to settle on flat note at 74.83 against US currency due to dollar demand from foreign banks. Besides, higher-than-expected borrowing in the next financial year and weak fiscal deficit projections from the government weighed on investor sentiment. At the interbank foreign exchange, the rupee opened at 74.76 against the American dollar, and later witnessed an intra-day high of 74.71 and a low of 75.02 against the greenback. The local unit finally ended the day at 74.83, down 1 paisa from the previous close of 74.82.

Domestic equity indices ended with robust gains on Wednesday, rising for the third straight session. The barometer index, the S&P BSE Sensex, added 695.76 points or 1.18% to 59,558.33. The Nifty 50 index advanced 203.15 points or 1.16% to 17,780. Foreign portfolio investors (FPIs) sold shares worth Rs 183.60 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 425.96 crore in the Indian equity market on 2 February, provisional data showed.

Overseas, Asian stocks are trading mixed on Thursday amid some lingering concerns about global growth and ongoing geopolitical tensions. A number of major markets, including those on the Chinese mainland and in Hong Kong, remain shut for the Lunar New Year holidays. US stocks rose for a fourth straight day Wednesday, as Alphabet propelled gains in tech thanks to strong quarterly earnings. On the data front, investors are awaiting the U.S. Labor Departments nonfarm payroll count due Friday, which is seen as one of the major indicators of the how the U.S. economy is doing.

Geopolitical tensions in eastern Europe remained at heightened levels after the Pentagon reportedly said it will move some of its Europe-based forces further east and deploy additional U.S.-based troops to Europe. That deployment comes as an estimated 100,000 Russian troops equipped with advanced weaponry line Ukraines eastern border with Russia and northern border with Belarus, which is an ally to Moscow, as per reports.

Meanwhile, the dollar index, that measures the greenback against a basket of currencies fell 0.3% to 95.9260. It is on track for its largest weekly percentage loss since November 2020, at 1.3%. The dollar declined to a more than a one-week low after data showed a drop in U.S. private sector employment in January due to the increase in COVID-19 infections.

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