The rupee is down 5.84% against the US dollar so far this year
The rupee moved in a narrow range in early trade on Tuesday, a day after Moody's lowered India's credit rating to a notch above junk. It moved in a range of 75.53-75.60 in the first half of the four-hour session, having started the day nearly unchanged at 75.56 compared to its previous close of 75.54. While strength in the dollar overseas kept pressure on the rupee, extended gains in the domestic equity markets amid foreign inflows provided some support to the currency, say analysts.
On Monday, Moody's Investors Service downgraded the country's credit rating to "Baa3" from "Baa2" citing a prolonged period of slow growth in Asia's third largest economy, rising debt and persistent stress in parts of its financial system.
The cut is not driven directly by the impact of the coronavirus but that the pandemic had amplified vulnerabilities in the country's credit profile that were present and building prior to the shock, Moody's said.
The agency maintained a negative outlook for the new sovereign rating, citing worsening government finances as the coronavirus continues to hurt the economy.
"Risk appetite soured this morning as US President Donald Trump vowed to use force to end violent protests in American cities," Reliance Securities said in a research note.
The brokerage also said that the Moody's downgrade and further downgrade expectations from other rating agencies could limit appreciation in the rupee. Investors are also concerned about rising coronavirus cases and its impact on the global as well as domestic economy.
Crude oil prices rose on Tuesday, with traders waiting to see whether major producers agree to extend their huge output cuts to shore up prices at a virtual meeting expected later this week. Brent crude futures - the global benchmark for crude oil - rose 0.91 per cent to $38.67 per barrel.
Foreign institutional investors net purchased Indian equities worth Rs 1,575.46 crore on Monday, provisional data showed.
Currency markets currently operate within reduced trading hours due to the coronavirus-induced lockdown. The temporary timings are from 10 am to 2 pm, instead of the normal timings of 9 am to 5 pm.
At Monday's close of 75.54, the rupee is down 5.84 per cent against the US dollar so far this year.
