Rupee Plunges 50 Paise To 81.82, Despite A Softer Dollar

Rupee Today: Rupee weakens despite a softer dollar on Monday

The rupee reversed gains from earlier in the session to end lower on Monday, despite a softer dollar, driven largely by large corporate outflows, dollar demand from oil companies and higher crude prices in the international market.

Bloomberg showed the rupee was last changing hands at 81.8175 per dollar after opening at 81.2162, compared to its previous close of 81.3163 on Friday.

According to PTI, the domestic currency fell 47 paise to close provisionally at 81.80 against the US dollar.

“The USDINR pair was bought at lower levels of 81.25 driven by Vedanta’s dividend outflow, MSCI (stocks) outflow, and oil buying took the pair to a high of 81.79. Thus, despite Asian currencies gaining against the dollar, the rupee was not able to capitalise and was sold off,” said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.

The inability of the pair (USD/INR) to move below 81 last week in the face of positive news is probably leading to interbank reconsidering short rupee positions, a trader told Reuters, while another trader said there was talk of an MSCI rebalancing-related dollar outflow but was doubtful if that was the case.

A 1.4 per cent rise in oil prices, which is concerning because India is one of the biggest commodity consumers, increased the pressure on the rupee.

The dollar languished near a five-month low on Monday as investors hoped that moving to lift economic restrictions in China would eventually improve prospects for the global economy and commodity demand, pushing the dollar down against the yuan.

“While the easing of some restrictions does not equate to a wholesale shift away from the dynamic COVID zero strategy just yet, it is further evidence of a shifting approach, and financial markets look to be firmly focussed on the longer-term outlook over the near-term hit to activity as virus cases look set to continue,” said Taylor Nugent, an Economist at NAB, told Reuters.

News of the European Union’s embargo and price limitations on Russian crude, which starts on Monday, helped oil prices rise after OPEC+ nations reiterated the cut to their output.