Rupee rebounds 38 paise to 79.25 against dollar on forex inflows

The rupee on Wednesday rebounded by 38 paise to close at 79.25 against the US currency following foreign fund inflows and a weak greenback in the global markets.

The US dollar index traded lower ahead of the release of US inflation data which was widely expected to be marginally lower than June numbers.

US inflation slowed down from a 40-year high in June to 8.5 per cent in July on lower gasoline prices, the official data released after market hours showed.

At the interbank forex market, the local unit opened at 79.59 against the greenback and later strengthened to the day's high of 79.25 as crude oil retreated and the US dollar traded lower in global markets.

The local unit finally settled at the day's high of 79.25, showing a gain of 38 paise over the previous close.

In the previous session on Monday, the rupee had closed at 79.63 against the US dollar. The forex market was closed on Tuesday on account of 'Muharram'.

"Indian rupee appreciated on a soft US Dollar and weak crude oil prices. However, risk aversion in global markets capped sharp gains in Rupee," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas.

Choudhary further said, "We expect Rupee to trade on a mixed note. Recovery in domestic markets from lower levels and FII inflows may support Rupee. Weakness in US Dollar may also support Rupee."

"Dollar may take cues from inflation data as it may provide some cues over US Fed's rate hike expectations. Geopolitical tensions as China extended its military drills near Vietnam may cap sharp upside in Rupee," Choudhary said, adding that USDINR spot price is expected to trade in a range of Rs 78.50 to Rs 80.50 in the next couple of sessions.

As the US inflation data is expected to come marginally lower, hence the dollar index was seen trading weak, below 106, said Jateen Trivedi, VP Research Analyst at LKP Securities.

Trivedi further said that the rupee has also gained on macro factors and on crude weakness. "Rupee range can be seen between 79.30-79.80," he said.

"The Indian rupee outperforms among Asian currencies amid corporate dollar inflows and lacklustre global cues ahead of US inflation data," said Dilip Parmar, Research Analyst, HDFC Securities.

The market is pricing in a cool-down in US inflation from the previous reading from 9.1 per cent to 8.7 per cent year-on-year.

"However, the US Fed remains hawkish and wants to see a clear decelerating trend before slowing the pace of tightening before the next FOMC meeting on September 21, which will bid well for the dollar," Parmar said.

The dollar index, which measures the greenback's strength against a basket of six currencies, was down 0.18 per cent at 106.18.

Brent crude futures, the global oil benchmark, fell 1.10 per cent to USD 95.25 per barrel.

In the near-term, spot USDINR is expected to trade in the range of 78.85 to 79.90, he added.

On the domestic equity market front, the BSE Sensex ended 35.78 points or 0.06 per cent lower at 58,817.29 points, while the broader NSE Nifty gained 9.65 points or 0.06 per cent to 17,534.75.

Foreign institutional investors were net buyers in the capital market on Wednesday, purchasing shares worth Rs 1,061.88 crore, as per exchange data.