Rupee pares initial gains, settles 15 paise lower at 86.67/USD

Mumbai: The rupee pared initial gains and settled for the day 15 paise lower at 86.67 (provisional) against the US dollar on Monday, as month-end dollar demand from importers continued to keep the American unit well bid.

Forex traders said investors traded cautiously awaiting the outcome of India-US trade talks ahead of the August 1 deadline. Moreover, a negative trend in the domestic equity markets dented investors' sentiments further.

Investors also remained cautious ahead of the US Federal Reserve and Bank of Japan's monetary policy decisions next week, they said.

At the interbank foreign exchange, the domestic unit opened at 86.47 against the greenback and touched an intra-day high of 86.40 and a low of 86.67 against the greenback.

At the end of Monday's trading session, the local unit settled at 86.67 (provisional), down 15 paise over its previous closing price.

On Friday, the rupee declined 12 paise to settle at 86.52 against the US dollar.

"The Indian rupee has depreciated against the US dollar, mirroring the trend of most Asian currencies. This weakening is largely attributed to the strengthening dollar, which gained momentum following the recent EU-US Trade deal.

"The dollar's rise was further fuelled by a buying spree leading up to the trade deal deadline, coupled with foreign fund selling in the Indian market," said Dilip Parmar, Research Analyst, HDFC Securities.

In the near-term, the spot USD-INR pair is expected to find support at 86.10 and face resistance at 86.75, he added.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.54 per cent to 98.17.

Brent crude, the global oil benchmark, went up by 0.85 per cent to USD 69.02 per barrel in futures trade, after the EU and US reached a trade agreement that eased tariff concerns and boosted future energy demands.

In the domestic equity market, the 30-share BSE Sensex declined 572.07 points, or 0.70 per cent, to close at 80,891.02, while the Nifty fell 156.10 points, or 0.63 per cent, to settle at 24,680.90.

Foreign institutional investors (FIIs) offloaded equities worth Rs 1,979.96 crore on a net basis on Friday, according to exchange data.

Forex traders said rupee is trading with a slight negative bias amid uncertainty ahead of the August 1 trade deal deadline.

If the discussions fail or get delayed, Indian exporters could face fresh pressure -- adding to the rupee's challenges.

However, if a deal is reached, it could offer a much-needed breather. Until then, the uncertainty is likely to keep market participants cautious.

Meanwhile, India's forex kitty declined by USD 1.183 billion to USD 695.489 billion during the week ended July 18, the RBI said on Friday.

In the previous week, the overall kitty had dropped by USD 3.064 billion to USD 696.672 billion. The reserves had touched an all-time high of USD 704.885 billion at end-September 2024.