Daijiworld Media Network – Mumbai
Mumbai, Feb 4: The Indian rupee weakened by 22 paise to 90.54 against the US dollar in early trade on Wednesday, after witnessing a sharp rally in the previous session on optimism surrounding an India-US trade deal.
Forex traders said the rupee came under pressure due to suspected dollar buying by corporates and importers, while market participants remained cautious as the trade agreement is yet to be signed or officially released.
At the interbank foreign exchange market, the rupee opened at 90.35 but soon slipped to 90.54, marking a decline from its previous close.
On Tuesday, the rupee had emerged as the best-performing Asian currency, registering a record single-day gain of 117 paise (1.28%) to settle at 90.32, after reports of India and the US reaching a trade understanding.
Commenting on the movement, Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, said the rupee returned to its weakening trend after the initial rally, adding that the RBI was seen buying dollars towards the end, pushing the dollar higher.
Market experts noted that investors are trading with restraint until more clarity emerges on the final structure and commitments of the deal.
CR Forex Advisors MD Amit Pabari said sustained improvement in FII inflows would depend on further details and formalisation of the agreement.
Meanwhile, US President Donald Trump reportedly stated that India would reduce purchases of Russian crude oil over an unspecified timeline, while increasing imports of US energy, including oil and coal, and potentially Venezuelan crude with US approval. Analysts warned that moving away from discounted Russian oil could be difficult for India and may impact energy costs and the external balance.
In global markets, the dollar index was marginally lower at 97.41, while Brent crude rose 0.65% to USD 67.77 per barrel.
On the domestic equity front, the Sensex gained 68.49 points to 83,816.96, while the Nifty rose 51.90 points to 25,779.45 in early trade.
Foreign Institutional Investors (FIIs) bought equities worth Rs 5,236.28 crore on Tuesday, exchange data showed.