Rupee Rises 74 Paise in Early Trade but Reverses Gains on Mid-Month Dollar Demand

Mumbai: The Indian rupee appreciated 74 paise to 84.62 in early trade on Tuesday but fell due to mid-month buying of dollars by nationalized banks, who bought dollars for Reserve Bank of India, oil, defense payments and interest payments. According to traders, around $600 million of debt repayment happened during the day. Besides, a small stake sale of $ 250 million in PayTM and $ 142 million in KFin Technologies and a steep sell off in domestic equities also weighed on the rupee. Benchmark indexes ended about 1.6 per cent lower on Tuesday.

The US President Donald Trump cut reciprocal tariffs to 34 per cent for China while Beijing slashed it to 10 per cent. The dollar index, which gauges the greenback's strength against a basket of six currencies, crossed 100 to move to 101.64 on the trade truce and could extend gains if the trade truce sparks global demand shift, said Anil Bhansali, Finrex Treasury Advisors.

At the interbank foreign exchange, the domestic unit opened at 84.70 and moved between the intra-day high of 84.62 and the low of 85.48 against the greenback. The unit ended the session at 85.33 registering a gain of 3 paise over its previous closing level. On Friday, the rupee pared its initial losses and had settled for the day higher by 22 paise at 85.36 against the US dollar. The foreign exchange market was closed on Monday on account of Buddha Purnima.

Meanwhile, rising crude oil prices prompted Indian oil importers to increase their hedging activities. Brent crude, the global oil benchmark, rose 0.42 per cent to $ 65.23 per barrel in futures trade.

Over the last few sessions, Brent crude prices have surged to near $ 65 per barrel, which could widen India's trade deficit.

Dilip Parmar, senior research analyst, HDFC Securities said, “Looking ahead, the USD-INR spot rate is expected to encounter resistance around 86.30 and find support near 84.70.”