Representative Image / Photo:Reuters
Mumbai: The rupee declined by 13 paise to close at 79.95 against the US currency on Wednesday as growing expectations of aggressive interest rate hikes by the US Fed drove the greenback to multi-year highs against major global currencies.
Forex inflows into equities and weak crude oil prices, however, restricted losses in the local currency.
At the interbank foreign exchange market, the domestic currency opened at 79.93 per dollar. It hovered in a range of 79.84 to 79.9550 during the session.
The domestic unit finally settled at 79.95, down 13 paise over its previous close of 79.82.
Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas said that a strong dollar overseas hit the rupee sentiment.
The US Dollar surged as economic data from the US surprised the markets. The US ISM services PMI unexpectedly rose to 56.9 in August from 56.7 in July.
"We expect Rupee to remain weak on strong US Dollar and weak cues from global markets. Dollar index surged to a fresh 20-year high and is currently trading around 110.45 levels. Recovery in crude oil prices from lower levels may also weigh on rupee," Choudhary said.
USDINR spot price is expected to trade in a range of Rs 79 to Rs 80.50 in the next couple of sessions.
"Rupee continued to trade in a narrow range despite volatility in major crosses. The dollar rose after a report on the US services industry in August reinforced the view that the US was not in recession," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
The volatility for the dollar could remain low as no major economic data is expected to be released from the US.
"We expect the USDINR(Spot) to trade sideways and quote in the range of 79.70 and 80.05," Somaiya said.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.16 per cent higher at 110.39.
The dollar surged to more than 40-year high levels against the Japanese yen while the sterling fell to levels not seen since 1985.
Brent crude, the global oil benchmark, declined by over 3 per cent to USD 89.68 per barrel due to recession fears and strict Covid measures by China.
On the domestic equity market front, the BSE Sensex ended 168.08 points or 0.28 per cent lower at 59,028.91, while the broader NSE Nifty declined 31.20 points or 0.18 per cent to 17,624.40.
Foreign institutional investors were net buyers in the capital marketon Wednesday as they purchased shares worth Rs 758.37 crore, according to the exchange data.