Currency Market News: Rupee trades flat as crude prices, dollar demand offset weak greenback

Rupee moved in a narrow band during Thursday morning trade as support from a weaker US dollar index was offset by higher crude oil prices and sustained dollar demand from importers and foreign banks.

Forex traders noted that although the dollar index (DXY) has slipped to the 99-mark signalling broad-based weakness and a potential tailwind for the rupee, the shrinking yield gap between Indian and US bonds is reducing the appeal of Indian assets.

At the interbank foreign exchange market, the domestic currency opened at 85.59 per dollar and moved between an intraday high of 85.58 and a low of 85.67. The rupee had settled at 85.58 against the US dollar on Wednesday.

“Indian rupee fell to 85.70 on Wednesday before closing at 85.58 on constant demand from oil companies and importers. The oil companies were probably buying to fill strategic reserves,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

Also Read:Currency Market News: Rupee slips 1 paisa to 85.59 vs dollar

Bond yield spikes and crude rally weigh

The US dollar index, which measures the greenback against a basket of six major currencies, was trading 0.06 per cent lower at 99.49.

“Surging US bond yields, with 20-year yields spiking to 5.131 per cent and 10-year yields climbing to 4.607 per cent – both multi-month highs – are rattling global investors. The moves come amid growing fears that the US tax and spending bill could add over  $5 trillion to the deficit by 2034,” said CR Forex Advisors MD Amit Pabari.

In global commodities, Brent Crude the international oil benchmark was trading 0.03 per cent higher at $64.93 per barrel amid rising geopolitical tensions in the Middle East, further weighing on the rupee.

On a positive note, appreciation in the Chinese yuan and Japanese yen against the dollar has offered some relief to the Indian currency. Pabari said, “Broad-based dollar weakness is expected to act as a tailwind for the rupee in the short-term.”

From a technical standpoint, the USD/INR pair is expected to remain range-bound with key resistance near 85.80, while immediate support lies in the 85.20-85.30 zone, he added.

Also Read:First Trade: Nifty opens weak by 98 points; IT stocks top laggard 

Stock market snapshot

Meanwhile, Indian equity benchmarks opened lower amid weak global cues and sectoral rotation. The Nifty50 slipped 98 points in early trade to hover near the 24,700 level.

Broader markets also mirrored the cautious mood, shedding up to 0.5 per cent. On the institutional front, Foreign Institutional Investors (FIIs) bought equities worth Rs 2,201.79 crore on Wednesday.

(With inputs from PTI)