Rupee trades in narrow range against US dollar in early trade, rises by 2 paise to 84.58

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The Indian Rupee opened on a flat note in early trade on Monday, moving within a narrow range and gaining just 2 paise to reach 84.58 against the US dollar, slightly above its all-time low. The currency faced pressure due to disappointing macroeconomic data, a negative trend in domestic equities, and global factors, including concerns sparked by remarks from President-elect Donald Trump.

Forex traders reported that Asian currencies, including the Chinese Yuan (CNH), South Korean Won (KRW), and Indonesian Rupiah (IDR), were also under pressure after Trump made comments about a 100 per cent tariff on BRICS currencies. Additionally, the US dollar maintained strength, and persistent foreign portfolio outflows continued to dampen investor sentiment.

Trump, on Saturday, warned that the US would impose a 100 per cent tariff on the BRICS nations (Brazil, Russia, India, China, and South Africa) if they undermined the value of the US dollar. This rhetoric added to the uncertainty in global markets and further weakened the Rupee.

At the interbank foreign exchange, the Rupee opened at 84.59 and traded in a tight range, touching 84.58 against the greenback, marking a modest 2-paise gain over its previous close. Earlier in the session, it had touched a new all-time low of 84.60. On Friday, the Rupee had depreciated by 13 paise, closing at 84.60, marking a fresh record low.

Meanwhile, the dollar index, which measures the greenback's performance against a basket of six major currencies, was up by 0.52 per cent at 106.28. Brent crude, the global oil benchmark, rose by 0.57 per cent to USD 72.25 per barrel.

Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, stated, "With Trump indicating tariffs on BRICS currencies and India's slowing GDP growth, the Rupee opened weaker today. The market is watching the Reserve Bank of India (RBI) to see how it will intervene to support the currency."

India's forex reserves had decreased by USD 1.31 billion, reaching USD 656.58 billion for the week ending November 22, according to the RBI. This followed a larger drop of USD 17.76 billion in the previous week.

On the domestic front, India's GDP growth slowed to 5.4 per cent for the July-September quarter, a near two-year low, mainly due to poor performance in the manufacturing and mining sectors, coupled with weak consumption. The weak economic performance and declining forex reserves weighed heavily on the Rupee's outlook.

The performance of domestic equities also added pressure. The Sensex was down by 343 points, or 0.43 per cent, to 79,459.79, while the Nifty lost 106.65 points, or 0.44 per cent, to 24,024.45.

In addition, foreign institutional investors (FIIs) continued to sell off shares, contributing to the pressure on the currency. On Friday, FIIs were net sellers, offloading shares worth Rs 4,383.55 crore, according to exchange data.

PTI reports indicate that the ongoing selling by foreign funds and the weak macroeconomic outlook may continue to strain the Rupee in the near term.

(With inputs from PTI)