The rupee on Wednesday lost 68 paise to close at 79.21 (provisional) against the US dollar, as disappointing macroeconomic data weighed on investor sentiment.
In the interbank forex market, the local currency opened at 78.70 and fell further to settle the day’s low at 79.21.
On Tuesday, the rupee edged up 53 paise – its best one-day gain in 11 months – to settle at a one-month high of 78.53 against the US dollar.
“India’s disappointing macroeconomic data also put pressure on the rupee. India Services PMI declined from 59.2 in June to 55.5 in July, while the overall PMI declined from 58.2 to 56.6 during the same period.
“India’s trade deficit widened to $31.02 billion in July from $26.18 billion in June,” said Anuj Choudhary, Research Analyst at Sharekhan, BNP Paribas.
However, a fall in crude oil prices and foreign fund inflows capped the fall. FIIs remained net buyers in the capital markets on Tuesday as they bought shares worth Rs 825.18 crore, according to exchange data.
Global oil benchmark Brent crude futures fell 0.95% to $99.58 a barrel.
Mr Chowdhury further said that the US dollar was received on an appeal for a safe haven amid geopolitical tensions between the US and China on US Speaker Nancy Pelosi’s visit to Taiwan.
“The dollar also strengthened on sharp statements from Fed officials and indicated aggressive rate hikes in the near term. Weak jobs data led to sharp gains in the dollar,” Mr. Chowdhury said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.05% to 106.19.
India’s disappointing macroeconomic data may keep the pressure on the rupee depreciating. However, weak crude oil prices and inflow of foreign investors could curtail the fall.
Traders can remain cautious even before the monetary policy results of the Reserve Bank of India (RBI) at the end of the week.
“The spot price of USDINR is expected to trade in the range of ₹78.20 to ₹79.80 in the next few sessions,” Mr. Choudhary said.
On the domestic equity market front, the BSE Sensex closed 214.17 points or 0.37% higher at 58,350.53, while the broader NSE Nifty jumped 42.70 points or 0.25% to end at 17,388.15.
India’s exports fell marginally in July for the first time in 17 months, while the trade deficit tripled to $31 billion due to a more than 70 percent increase in crude imports.
The S&P Global India Services PMI Business Activity Index fell from 59.2 in June to 55.5 in July, pointing to the slowest rate of growth in four months.
Meanwhile, the S&P Global India Composite PMI Output Index – which measures combined services and manufacturing output – fell to 56.6 in June from 58.2, highlighting the slowest growth since March.