Rupee slides by 5 paise to end at 75.84 on forex outflows

The rupee settled 5 paise lower at 75.84 against the US dollar on Friday as volatile domestic equities and sustained foreign fund outflows weighed on investor sentiment.

Forex traders said risk appetite has waned and there are growing concerns about the resurgence of COVID-19 infections.

The rupee opened weak at 76.10 at the interbank forex market, but recouped most of the losses to close the day at 75.84 against the US dollar, down 5 paise against the last close of 75.79.

"The stock market was taking the reopening extremely well, but now there's a possibility of a second wave of infections. This has soured market sentiment. Also, the US Fed provided a weaker assessment of the US economy on Thursday," said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further said that "the uncertainty over coronavirus won't completely fade away unless there's a vaccine. So until then the appreciation in the rupee will be limited, and we expect it to remain volatile".

For the first time since the COVID-19 outbreak, India recorded over 10,000 new cases in a day taking the tally to 2,97,535, while the death toll rose to 8,498 with a record single-day spike of 396 fatalities, according to Health Ministry data.

Globally, the number of cases linked to the disease has crossed 75.17 lakh and the death toll has topped 4.21 lakh.

Indian stocks reversed early deep losses to close higher by 0.72 per cent. The 30-share BSE Sensex closed at 33,780.89, up 242.52 points. The NSE Nifty rose by 70.90 points, or 0.72 per cent, to end at 9,972.90.

Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 805.14 crore on Thursday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, fell 0.78 per cent to USD 38.25 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.19 per cent to 96.54.

On a weekly basis, the domestic unit has depreciated by 26 paise. It had settled at 75.58 on June 5.

"The week gone by was quite volatile with global financial market witnessing high volatility amid rise of COVID-19 cases. The surge in dollar index and profit booking in global equities dragged rupee lower this week," said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.

Going ahead, market participants will take the cues from the CPI and industrial production data.

"The likelihood of a possible second wave of the coronavirus infections in the US, along with the Fed's grim growth outlook for the year has stoked risk aversion globally, and that has put pressure on the rupee," said Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking.

According to the Ecoscope report of Motilal Oswal Financial Services, amid weak global and domestic economic activity and the crash in crude oil prices, the net impact on India's external account is expected to be positive.

As per the report, India is expected to post its first current account surplus in 18 years in FY2021.

"With foreign capital inflows, India's foreign exchange reserves could witness further build-up," the report said. Accordingly, Motilal Oswal Financial Services expects the INR to remain stable at 74-75 against the USD and average 74.8 in FY2021.

Meanwhile, the Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.7907 and for rupee/euro at 86.0472. The reference rate for rupee/British pound was fixed at 96.1046 and for rupee/100 Japanese yen at 70.77.