Rupee falls 8 paise to 85.70 against US dollar in early trade

Mumbai: The rupee depreciated 8 paise to 85.70 against the US dollar in early trade on Thursday amid renewed headwinds from global risk sentiment and persistent foreign fund outflows.

Forex traders said the rupee was trading in a narrow range largely due to RBI’s cautious strategy as any dip in USD-INR is likely to be met with dollar buying by the RBI, not only to manage maturities but also to rebuild its intervention cushion.

This persistent demand for dollars by the central bank is limiting the gains for the rupee, they said.

At the interbank foreign exchange, the domestic unit opened at 85.69 against the greenback. In initial trade, it witnessed a low of 85.70, registering a fall of 8 paise over its previous close.

On Wednesday, the rupee depreciated 3 paise to close at 85.62 against US dollar.

Traders are awaiting the US trade deal and the NFPR data to gauge the markets direction which overall looks lower towards 85, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.07 per cent to 96.84.

Brent crude, the global oil benchmark, fell 0.72 per cent to USD 68.61 per barrel in futures trade.

"Brent crude prices have started inching back up -- hovering near USD 68.5 per barrel. For a net oil importer like India, this poses a short-term threat to the trade balance as rising crude typically means higher import bills and a heavier current account, putting additional pressure on rupee," CR Forex Advisors MD - Amit Pabari said.

Meanwhile, in the domestic equity market, the Sensex advanced 168.93 points or 0.20 per cent to 83,578.62, while Nifty rose 52.75 points or 0.21 per cent to 25,506.00.

Foreign institutional investors (FIIs) offloaded equities worth Rs 1,561.62 crore on a net basis on Wednesday, according to exchange data.

"FIIs have remained net sellers in Indian markets, pulling out over USD 6 billion year-to-date. This ongoing outflow has acted as a key drag on rupee strength, offsetting the supportive global dollar weakness," Pabari added.