The Indian rupee snapped its four-day losing streak in the early trade on Monday, appreciating by about 24 paise against the U.S. dollar as the greenback took a breather after last week’s U.S. jobs data soothed jitters about the timing of policy normalisation.
The dollar to rupee conversion today fell to 74.5 against the U.S. currency, down from Friday’s close of 74.74. The rupee has lost over 170 paise in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened over 17 paise so far in last three trading sessions.
“We keep the trajectory for USD/INR (USD to INR pair) but calibrated the forecasts higher. The damage of the second wave has started to sink in, amplified by the downgrades in growth forecasts by credit rating houses (S&P and Moody’s) for FY22. Key move to contain damage to the economy within 2Q at this point is to ramp up vaccination rates and India has moved to approve the 4th vaccine for emergency use – Moderna. The first three vaccines approved were Covishield, Covaxin and Sputnik V. There are signs that vaccine supply shortage has eased recently,” noted analysts at Maybank
“According to a set of government data released on 29 Jun, the total number of vaccines administered in the last two weeks has exceeded the number of people who registered for vaccines in the same period. The pace of inoculation was slower in May when the federal government wanted to leave vaccine purchase to the states. But since last week, the Federal government has taken up the responsibility of supplying vaccines to all states, thereby improving the speed of procurement and vaccinations.”
It is worth noting that sustained foreign fund outflows, higher oil prices and firm U.S. dollar will continue to weigh on the rupee.
The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.11% higher at 92.324 – pulling back from three-month highs as rate hikes bets ebbed.
The dollar is expected to rise over the coming year, largely driven by the Fed’s dot plot released last week, which suggested an expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected push the USD to INR pair higher.
It is worth noting that the U.S. markets are closed on Monday in observation of Independence Day.
The benchmark equity indices BSE Sensex was trading 349.62 points or 0.67% higher at 52,839.60, while the broader NSE Nifty advanced 99.40 points or 0.63% to 15,821.55.
However, foreign institutional investors were net sellers in the capital market on Friday as they offloaded shares worth Rs 982.80 crore, as per exchange data. Global oil benchmark Brent futures fell 0.12% to $76.09 per barrel.
This article was originally posted on FX Empire
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