MUMBAI, Mar 6: The Indian rupee ended its three-day gaining streak, falling by 6 paise to settle at 87.12 (provisional) against the US dollar on Thursday, amid trade tariff uncertainties and ongoing foreign fund withdrawals.
Forex traders noted that caution prevailed among investors as they awaited the release of weekly unemployment claims data from the US and the European Central Bank’s monetary policy announcement.
However, a positive trend in the equity market, the US dollar’s weakness abroad, and declining crude oil prices helped cushion the losses for the local currency.
Initially, the rupee strengthened following news that the US postponed the implementation of higher tariffs on Canada and Mexico, along with the Reserve Bank of India’s move to inject Rs 1.9 trillion into the banking system.
On the interbank foreign exchange market, the rupee opened at 86.96 and peaked at 86.88 against the dollar. It later fluctuated, hitting a low of 87.16 before closing the session at 87.12 (provisional), down 6 paise from the previous day’s close.
The rupee had previously settled at 87.06, 13 paise higher against the US dollar, marking three consecutive days of gains, with an overall increase of 18 paise in the last two sessions.
Anuj Choudhary, a Research Analyst at Mirae Asset Sharekhan, stated that the rupee lost its initial strength due to selling pressure from Foreign Institutional Investors (FIIs), even as the US dollar hit a four-month low following the tariff delay decision.
He anticipates that the rupee may trade with a slight positive bias, supported by favorable domestic markets and a weaker US dollar, although FII outflows could limit substantial gains. “Given the uncertainty surrounding the trade tariff situation, traders will likely look to the upcoming US unemployment claims data and the ECB’s monetary policy decision. The USD-INR spot price is expected to fluctuate between 86.80 and 87.25,” he added.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was down by 0.15% at 104.12.
Brent crude oil, the global benchmark, rose by 0.39% but remained at a six-month low of USD 69.57 per barrel in futures trading.
On the domestic equity front, the 30-share BSE Sensex surged by 609.86 points or 0.83%, closing at 74,340.09. Similarly, the Nifty climbed 207.40 points or 0.93%, settling at 22,544.70 points, both indices having gained over 1% in the previous trading session.
As per exchange data, Foreign Institutional Investors (FIIs) sold equities valued at Rs 2,895.04 crore on a net basis on Wednesday.
On Wednesday, the Reserve Bank announced it would conduct open market purchases of government securities and USD/INR swaps worth approximately Rs 1.9 lakh crore this month.
Earlier, on February 28, the central bank executed a USD 10 billion dollar-rupee swap to bolster long-term liquidity in the financial system, which saw strong demand during the auction.
In political news, US President Donald Trump granted a one-month exemption from his stringent new tariffs on imports from Mexico and Canada to US automakers, concerned that the emerging trade conflict could severely impact domestic manufacturing. This decision came shortly after Trump met with executives from major automakers Ford, General Motors, and Stellantis. (PTI)
