The rupee snapped a six-session gaining streak on Monday, weighed down by dollar demand from importers and outflows linked to ICICI Asset Management Company, dealers said.
Market participants said that dollar demand linked to outflows following the expiry of the lock-in period for ICICI Asset Management Company’s IPO weighed on the rupee during the day.
The domestic currency fell to an intraday low of 94.75 per dollar, even as Brent crude prices remained below recent highs and global risk sentiment improved on expectations of progress in talks between the US and Iran. Market participants said importers stepped up dollar purchases at lower levels, while exporters remained cautious about selling aggressively.
The rupee settled at 94.68 per dollar, against the previous close of 94.33 per dollar.
“The Indian rupee fell on account of outflows from ICICI AMC, taking the rupee to a low of 94.75 per dollar as the dollar index reached a level of 101, while the euro, pound sterling and Japanese yen all fell and continued to remain lower against the dollar,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
The dollar index rose to around 101, while the euro, pound sterling and Japanese yen weakened against the greenback. Dealers said foreign currency non-resident (FCNR) and external commercial borrowing (ECB)-related inflows continued to support the rupee, though demand for dollars from oil marketing companies and foreign portfolio investors limited gains.
The rupee has remained within a 94.10 per dollar-94.80 per dollar range in recent sessions. Market participants said the 94.10 level has continued to provide support despite intermittent dollar sales linked to inflows.
The rupee has depreciated by 5.07 per cent in the current calendar year. In the current financial year, however, the local currency has appreciated by 0.14 per cent.
In the last six trading sessions, the rupee had gained nearly 1 per cent, supported by lower crude oil prices, improving risk appetite and expectations of foreign capital inflows. Dealers expect the currency to remain range-bound in the near term as inflows and importer demand continue to offset each other.
“The rupee is expected to remain in the current range because even if the inflows are coming on the debt side, there is still demand for dollars among importers,” said a dealer at a state-owned bank.
