The rupee reversed gains from earlier in the session and finished lower on Monday despite a weaker dollar driven largely by large corporate outflows, dollar demand from oil companies and higher crude oil prices in the international market.
Bloomberg showed the rupee last changed hands at 81.8175 per dollar after opening at 81.2162, compared to its previous close of 81.3163 on Friday.
According to PTI, the domestic currency fell 47 paise to close for now at 81.80 against the US dollar.
The USDINR pair was bought at a lower level of 81.25, driven by Vedanta’s dividend outflows, MSCI (stock) outflows and oil purchases took the pair to a high of 81.79. Despite Asian currencies gaining against the dollar, the rupee failed to capitalize and was sold,” said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
The pair’s (USD/INR) inability to move below 81 last week despite positive news is likely to lead to interbank reconsideration of short rupee positions, one trader told Reuters, while another said there had been an MSCI downturn. rebalancing-related dollar outflows, but doubted that was the case.
A 1.4 percent increase in the oil price, which is worrying as India is one of the world’s largest commodity consumers, added pressure to the rupee.
The dollar languished near a five-month low on Monday as investors hoped that lifting economic restrictions in China would eventually improve the outlook for the global economy and demand for commodities, pushing the dollar against the yuan.
“While the easing of some restrictions does not yet equate to a large-scale shift from the dynamic COVID zero strategy, it is further evidence of a shifting approach, and financial markets appear strongly focused on the longer-term outlook for the foreseeable future . term hit to activity as virus cases appear to persist,” Taylor Nugent, an economist at NAB, told Reuters.
News of the European Union embargo and price restrictions on Russian crude starting Monday helped oil prices soar after OPEC+ countries repeated production cuts.
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