Rupee drops 7 paise to 84.73 against the US dollar in early trade

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The Indian rupee depreciated by 7 paise to 84.73 against the US dollar in early trade on Monday, primarily weighed down by foreign fund outflows and a lacklustre performance in domestic equities.

Forex traders noted that the rupee continues to face pressure due to consistent demand for the US dollar from importers and foreign banks. The rupee opened at 84.70 against the greenback, and quickly fell to 84.73 in the initial hours of trading, marking a 7 paise drop from its previous close.

On Friday, the rupee had gained 5 paise, ending at 84.66 against the US dollar. Amit Pabari, MD of CR Forex Advisors, highlighted that attention will now shift towards upcoming domestic economic data, such as the Industrial Production (IIP) and Consumer Price Index (CPI) figures. These will be closely watched after the Reserve Bank of India's (RBI) recent monetary policy announcement. The RBI had decided to keep its key interest rate unchanged, citing concerns over inflation, but had lowered the Cash Reserve Ratio (CRR) by 50 basis points, injecting much-needed liquidity into the financial system.

Pabari also pointed out that while the rupee has faced downward pressure, expectations of a surge in Initial Public Offering (IPO) activities in the near term could lead to substantial foreign inflows, potentially providing additional support for the rupee. Despite these factors, he believes the rupee's downside remains limited, predicting that the USD/INR pair will likely trade within a range of 84.50 to 85 in the short term.

Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six major currencies, was trading 0.08% higher at 106.14. On the commodity front, Brent crude prices rose by 0.08% to USD 106.15 per barrel in futures trade.

In the domestic equity market, the BSE Sensex was down by 76.29 points or 0.09%, trading at 81,632.83 points, while the Nifty fell by 24.20 points, or 0.1%, to 24,653.60 points.

Foreign Institutional Investors (FIIs) had also offloaded a net Rs 1,830.31 crore in the capital markets on Friday, according to exchange data.

In positive news, India's foreign exchange reserves increased by USD 1.51 billion, reaching USD 658.091 billion for the week ended November 29, as reported by the RBI. This was an improvement after reserves had declined by USD 1.31 billion in the previous week.

As per PTI, the movement of the rupee continues to be shaped by external and domestic market factors, with attention on liquidity trends and economic indicators moving forward.

(With inputs from PTI)