Rupee falls 7 paise to 88.27 against US dollar in early trade

Mumbai: The rupee witnessed range-bound trading in morning deals on Friday and depreciated 7 paise to 88.27 against the US dollar, dragged lower by broad dollar strength and a negative trend in domestic equities.

Forex traders said the recovery in the US dollar capped the upside for the domestic unit. Moreover, worries over US tariffs on India dented investor sentiments further.

At the interbank foreign exchange market, the rupee opened at 88.22, then lost ground and touched a low of 88.27 against the US dollar, registering a decline of 7 paise over its previous close.

On Thursday, the rupee depreciated 35 paise to close at 88.20 against the US dollar.

"The rupee may have stumbled after its recent run, but the story is far from over. Supportive trade developments and firm domestic confidence suggest there is still room for appreciation," CR Forex Advisors MD Amit Pabari said.

Key support is placed at 87.70 -- a sustained break below this level could open the way toward 87.50 and, if momentum builds, even 87.20. On the flip side, resistance is likely to cap gains around 88.40, Pabari added.

Forex traders said weekly jobless claims in the US dropped sharply by 33,000, far better than market estimates. The surprise turnaround lifted the dollar index back toward 97 level after nearly dipping below 96 a day earlier.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.01 per cent to 97.34.

Brent crude, the global oil benchmark, was trading 0.09 per cent lower at USD 67.38 per barrel in futures trade.

On the domestic equity market front, the Sensex declined 264.36 points to 82,749.60 in early trade, while the Nifty dropped 65 points to 25,358.60.

Foreign Institutional Investors bought equities worth Rs 366.69 crore on a net basis on Thursday, according to exchange data.

Meanwhile, trade talks between India and the US are progressing and are moving in the right direction, Commerce and Industry Minister Piyush Goyal said on Thursday.

He said Assistant US Trade Representative for South and Central Asia Brendan Lynch was in New Delhi on September 16 for daylong talks with Indian official team.

The talks were important as the US has imposed a steep 50 per cent tariff on Indian goods.