Indian Rupee: Weak Opening On Cards

6 Jan 2022 , 09:00 AM

The Indian rupee is poised for a lower opening on Thursday, 06 January 2022 tracking an overnight surge in the dollar after the FOMC meeting minutes showed the US central bank might start raising interest rates from record-low levels sooner than expected. Pessimistic cues from global shares are also seen weighing down the local unit. However, sustained foreign fund inflows into the Indian markets and easing crude oil prices support the domestic currency.

On Wednesday, rupee surged 23 paise to close at 74.35 against the US dollar. At the interbank forex market, the local unit opened up at 74.54 against the greenback and witnessed an intra-day high of 74.30 and a low of 74.55. It finally settled at 74.35, a rise of 23 paise over its previous close. In the previous session, the rupee tumbled 30 paise to close at 74.58 against the US dollar.

Domestic benchmark indices rose for the fourth straight session on Wednesday, supported by firmness in banks and financial services. The barometer index, the S&P BSE Sensex, jumped 367.22 points or 0.61% at 60,223.15. The Nifty 50 index surged 120 points or 0.67% at 17,925.25. Foreign portfolio investors (FPIs) bought shares worth Rs 336.83 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 1,271.95 crore in the Indian equity market on 5 January, provisional data showed.

Overseas, Asian stocks are trading lower on Thursday following overnight losses on the Wall Street. US stocks fell sharply on Wednesday after U.S. Federal Reserve meeting minutes signalled the central bank may raise interest rates sooner than expected. The minutes from the Federal Reserves most recent meeting showed the central bank has discussed reducing its balance sheet shortly after it raises rates later this year. The minutes show officials to be considering shrinking the balance sheet along with raising rates as another way to remove policy accommodation. The Fed also signaled it could get more aggressive in raising rates.

After a sharp drop in the previous session, the dollar index surged overnight supported by a surge in U.S. Treasury yields on rising bets for a Federal Reserve rate hike by March. The U.S. dollar index, which measures the currency against the yen and five other major peers, was currently quoting at 96.15, having hit a low of 95.94 on Wednesday.

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