Rupee settles 9 paise down at 71.12 against US dollar

The rupee weakened by 9 paise to close at 71.12 against the US dollar on Friday due to a steady rise in crude oil prices and strengthening of the greenback overseas.

Forex traders said the rupee was weighed down against the US dollar after the RBI said it will conduct a special OMO in a move seen by market participants as an attempt to bring long-term yields lower.

At the interbank foreign exchange market, the domestic currency opened weak at 71.15, then went on to hit a low of 71.23 against the US dollar during the day.

It, however, gained some lost ground and finally settled at 71.12, showing a fall of 9 paise over its previous close. On Thursday, the local unit had settled at 71.03 against the greenback.

On a weekly basis, the rupee depreciated by 29 paise.

The Reserve Bank of India (RBI) on Monday will simultaneously purchase and sell government securities worth Rs 10,000 crore under a special Open Market Operation (OMO).

Such exercises are done by the central bank when the proceeds from sale of short-term securities are used to buy long-term government securities or bonds in a bid to bring down interest rates on long-term securities.

"Overall this month, USD/INR spot seesawed from 71.80 to 70.50, however, it has been observed that RBI has intervened in spot and did not let it fall below 70.50 zone," said Rahul Gupta, Head of Research- Currency , Emkay Global Financial Services.

Gupta further noted that for next week, there are no major events lined up and on account of Christmas holidays we will see lackluster movement in forex market.

"We expect USD/INR to trade within 70.90-71.50 amid caution over US-China Phase-One trade deal," he said.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose by 0.16 per cent to 97.53.

On the domestic market front, the 30-share BSE Sensex closed 7.62 points, or 0.02 per cent, higher at 41,681.54. It hit a lifetime intra-day high of 41,809.96 during the session. Similarly, the broader NSE Nifty rose 12.10 points, or 0.09 per cent, to its new record of 12,271.80. It hit an intra-day high of 12,293.90

"Market participants have been a little cautious ahead of the important US GDP number that will be released later in the session. For the USDINR(Spot), we expect it to quote in the range of 70.90 and 71.50," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Foreign institutional investors (FIIs) remained net buyers in equities, as they purchased shares worth Rs 739.43 crore on a net basis on Thursday, according to provisional exchange data.

Brent futures, the global oil benchmark, fell 0.44 per cent to USD 66.25 per barrel.

"Rupee extended losses on Friday early trade till afternoon as buying by nationalised banks continued due to oil prices higher around USD 66 in Brent," said Jateen Trivedi, Senior Research Analyst (Commodity & Currency) at LKP Securities.

The 10-year government bond yield was at 6.61 per cent.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.0813 and for rupee/euro at 79.0974. The reference rate for rupee/British pound was fixed at 92.9995 and for rupee/100 Japanese yen at 64.86.