Rupee plummets 68 paise to close at 79.21 against US dollar

Source: NewsCryp.to

August 04, 2022

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The rupee slumped 68 paise to close at 79.21 (provisional) against the US dollar on Wednesday, as disappointing macroeconomic data weighed on investor sentiment.

At the interbank foreign exchange market, the local currency opened lower at 78.70 and fell further to settle at the day's low of 79.21.

On Tuesday, the rupee rallied 53 paise -- its best single-day gain in over 11 months -- to close at an over one-month high of 78.53 against the US dollar.

"Dismal macroeconomic data from India also put downside pressure on Rupee. India Services PMI declined to 55.5 in July from 59.2 in June while Composite PMI declined to 56.6 from 58.2 during the same period.

"India's trade deficit widened to a record low USD 31.02 billion in July compared to USD 26.18 billion in June," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

However, decline in crude oil prices and foreign fund inflows cushioned the downside. FIIs remained net buyers in the capital market on Tuesday as they purchased shares worth Rs 825.18 crore, as per exchange data.

Brent crude futures, the global oil benchmark, fell 0.95 per cent to USD 99.58 per barrel.

Choudhary further said that the US Dollar gained on safe-haven appeal amid geopolitical tensions between the US and China on US Speaker Nancy Pelosi's Taiwan visit.

"Dollar also strengthened on hawkish statements by Fed officials and they hinted at aggressive rate hikes in the near-term. Weak jobs data capped sharp gains in dollar," Choudhary said.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.05 per cent to 106.19.

Disappointing macroeconomic data from India may continue to mount downside pressure on the rupee. However, weak crude oil prices and inflows from foreign investors may cushion the downside.

Traders may also remain cautious ahead of the Reserve Bank of India (RBI) monetary policy outcome towards the end of the week.

"USDINR spot price is expected to trade in a range of Rs 78.20 to Rs 79.80 in the next couple of sessions," Choudhary said.

On the domestic equity market front, the BSE Sensex ended 214.17 points or 0.37 per cent up at 58,350.53 points, while the broader NSE Nifty jumped 42.70 points or 0.25 per cent to 17,388.15.

India's exports dipped, though marginally, for the first time in 17 months in July, while the trade deficit tripled to a record USD 31 billion, fuelled by over a 70 per cent rise in crude oil imports.

The S&P Global India Services PMI Business Activity Index fell from 59.2 in June to 55.5 in July, pointing to the slowest rate of growth in four months.

Meanwhile, the S&P Global India Composite PMI Output Index -- which measures combined services and manufacturing output -- fell from 58.2 in June to 56.6, highlighting the slowest increase since March.

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