Rupee slips to 95.74 against US dollar

Rupee remained largely range-bound on Tuesday, but weakened 4 paise to 95.74 against the US dollar in early trade, as higher crude prices and dollar demand from importers put pressure on the currency.

The currency opened at 95.74 at the interbank foreign exchange market, compared with Monday's close of 95.70, when it had gained 1 paisa against the American currency.

Forex traders said rupee's movement was being contained by continued intervention from the Reserve Bank of India through state-run banks. The intervention came amid weakness in Asian equities and renewed geopolitical uncertainty around Iran.

"Overall, the rupee remains firmly range-bound around ₹95.50–96.00, with oil prices and RBI intervention likely to remain the key near-term drivers," said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.

According to Bhansali, rupee has stayed within a narrow range for the past two weeks. Oil companies and the RBI have been buying dollars at the lower end of the range, while the RBI has also been selling dollars around 95.75 to protect the downside to the currency.

The dollar index was at 99.04, up 0.04 per cent. The index, which tracks the US currency against six major currencies, was supported by safe-haven demand following the US escalation of sanctions on Iran. However, expectations around Treasury bond buybacks continued to weigh on the dollar.

Crude prices also remained a pressure point for rupee. Brent crude futures, the global oil benchmark, rose 0.30 per cent to $92.45 a barrel.

The weakness in the currency came alongside a softer start for domestic equities. The Sensex fell 30 points to 77,336.32 in early trade, while the broad-based Nifty declined 38.80 points to 24,179.50.

Foreign institutional investors, however, remained buyers in the equity market on Monday. Exchange data showed that they purchased equities worth Rs 1,181.66 crore on a net basis. Meanwhile, the RBI's special USD-INR forex swap facility for FCNR(B) deposits, Overseas Foreign Currency Borrowings (OFCB) and External Commercial Borrowings (ECB) had mobilised foreign exchange inflows of $73 billion as of August 21.