Rupee trades in narrow range against U.S. dollar

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| Photo Credit: V. Sudershan

The rupee was trading in a narrow range against the U.S. dollar in opening trade on February 2, tracking a muted trend in domestic equities.

Forex traders said investors preferred to stay on the sidelines as the U.S. Fed policy statement was hawkish.

At the interbank foreign exchange, the domestic unit opened weak at 81.81 against the dollar, then fell further to 81.86, registering a decline of 6 paise over its last close. It later pared its losses and was trading flat at 81.80 against the greenback.

On Wednesday, the rupee appreciated 8 paise to close at 81.80 against the dollar after Finance Minister Nirmala Sitharaman presented the Union Budget for 2023-24.

“The budget ticked most boxes. Government managed to strike a balance between maintaining capex thrust and attaining fiscal consolidation,” IFA Global Research Academy said in a research note.

Budgeted capex at ₹10 lakh crore is 33% higher year-on-year. Fiscal deficit meanwhile has been budgeted at 5.9% of GDP (₹17.8 lakh crore) for FY24, in line with most market estimates.

“Estimates for GDP growth, tax buoyancy, disinvestment look reasonable,” the research note said, adding that “the rupee is likely to trade in a 81.55-81.90 range intra-day with strengthening bias”.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.28% to 100.93, after the U.S. Fed hiked the Fed funds rate along expected lines by 25 basis points to 4.50-4.75%.

“The Fed acknowledged that inflation had eased somewhat, but continued to remain elevated. It reiterated that ongoing rate increase would be appropriate,” the note said.

Brent crude futures, the global oil benchmark, advanced 0.77% to $83.48 per barrel.

In the domestic equity market, the 30-share BSE Sensex was trading 24.67 points or 0.04% lower at 59,683.41. The broader NSE Nifty declined 31.50 points or 0.18% to 17,584.80.

Foreign Institutional Investors (FIIs) turned net buyers in the capital markets on Wednesday as they purchased shares worth ₹1,785.21 crore, according to exchange data.