MUMBAI: The rupee on Wednesday staged a mild recovery after a two-session fall and ended higher by 7 paise at 64.96 against the US currency on fresh bouts of dollar selling by banks and exporters even as domestic equities continued to decline.
Excess volatility and movements of the US dollar in global trade largely weighed on trade during the day, though the home currency largely withstood the initial uneasy momentum.
Sustained capital inflows into equities and debts predominantly weighed on trading sentiment.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 461.47 crore on Tuesday. The home currency plunged to fresh 1-week low on Tuesday on fears of oil price shock. Surging crude prices could hurt fiscal deficit target of the government for the current year and spur market concerns over the nation’s inflation outlook.
The deficit target for the current year has been kept at 3.2 per cent of GDP. India is the second-largest crude oil consumer in Asia after China. Most Asian currencies were mixed in the midst of growing uncertainties about the US tax reform plan and swelling crude prices.
In the meantime, Brent crude oil slipped back in Asian trading after an OPEC report forecast weaker demand growth for its crude than previously expected alongside an increase in supply from its competitors. The benchmark Brent crude is trading at USD 63.38 a barrel, down 0.49 per cent.
Meanwhile, local equities continued to wilt under immense selling pressure for the second straight session as investors booked profits in frontline counters and also rattled by political upheaval in Saudi Arabia.
The rupee resumed lower at 65.13 against Tuesday’s close of 65.03 at the Interbank Foreign Exchange (FOREX) due to consistent dollar demand from foreign banks and drifted further to 65.17 in early trade.