Indian Rupee: Weak Dollar Could Support

5 Jan 2022 , 09:11 AM

Growing concerns over the Omicron variant of coronavirus and its impact on economic recovery as well as firm crude oil prices is expected to take a toll on the Indian rupee in opening trades on Wednesday, 05 January 2022. However, sustained foreign fund inflows into the Indian markets and easing dollar ahead of Fed minutes could support the domestic currency.

On Tuesday, rupee slumped 29 paise to close at 74.57 against the US dollar. At the interbank foreign exchange market, the local currency opened at 74.49 and witnessed an intra-day high of 74.46 and a low of 74.61 against the US dollar. The local unit finally settled at 74.57, down 29 paise over its previous close of 74.28.

Domestic shares advanced for the third consecutive session on Tuesday, tracking strength in global stock markets. The barometer index, the S&P BSE Sensex, jumped 672.71 points or 1.14% at 59,855.93. The Nifty 50 index surged 179.55 points or 1.02% at 17,805.25. Foreign portfolio investors (FPIs) bought shares worth Rs 1,273.86 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 532.97 crore in the Indian equity market on 4 January, provisional data showed.

Overseas, Asian stocks are trading lower on Wednesday, with investors awaiting the minutes from the U.S. Federal Reserves latest meeting for clues on the central banks interest rate hike moves. Investors now await the minutes from the Feds meeting in December, due later in the day, and the U.S. jobs report, due to be released on Friday, for clues on the Feds potential pace of the hikes. In US, the Dow Jones Industrial Average scored a record closing high on Tuesday for the second straight day as financial and industrial shares rallied, while the Nasdaq fell.

Meanwhile, global benchmark Brent crude jumped on Tuesday to $80 a barrel, its highest since November, as OPEC and its non-OPEC allies, known collectively as OPEC+, agreed to stick to its planned increase for February based on indications that the Omicron coronavirus variant would have only a mild impact on demand.

The dollar was down on Wednesday morning in Asia as focus turns to the U.S. Federal Reserve that will release the minutes from its December meeting later in the day, which will be scrutinized for clues for the central banks rate hikes timetable. The US Dollar Index that tracks the greenback against a basket of other currencies inched down to 96.22.

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