Rupee Falls, adds pressure to inflation woes

The rupee depreciated 7 paise to trade around 83.13 against the US dollar in early trade on Tuesday amid firm crude oil prices and outflow of foreign funds from domestic equity markets. The local currency opened at 83.10 a dollar as compared to its previous close of 83.06.

Rupee Falls, adds pressure to inflation woes

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.01 percent lower at 102.17. The rupee, however, found support due to marginal weakness in American currency and positive sentiment in the equity markets. The rupee ended at 83.3950 against the US dollar , lower by 0.08 percent, compared with its previous close at 83.3250.

However, a weak greenback against major currencies overseas supported the local currency. At the interbank foreign exchange market, the local unit opened strong at 82.97 against the greenback and traded in range of 82.90-83.10. It finally settled at the day's low of 83.10, a decline of 7 paise over its previous close.

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The minor weakness observed in capital markets and profit booking after a rapid rally from 83.30 to 82.90 contributed to this downward movement. Despite this, the short term trend for the rupee looks positive, with the dollar index showing broad weakness and a positive money flow into Indian capital markets. The anticipated rupee range is between 82.75 and 83.25.

In the domestic equity market, the 30-share BSE Sensex settled 168.66 points or 0.24 percent lower at 71,315.09. The broader NSE Nifty fell 38 points or 0.18 percent at 21,418.65.

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Brent crude oil rose by 3.59 percent to USD 79.30 per barrel due to concerns over attacks by the Iranian- backed Houthis on container ships and oil tankers. A spike in oil prices and a lacklusture trend in domestic equity markets are some possible reasons for this depreciation. The main reason for currency depreciation is due to the factors such as economic fundamentals, interest rate differentials, political instability, or risk aversion among investors.

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