Rupee declines 7 paise to close at 74.62 against US dollar

The rupee weakened by 7 paise to end at 74.62 against the US currency on Wednesday as a stronger dollar and rising crude oil prices weighed on the investor sentiment.

The rupee traded in a narrow range ahead of the release of the minutes of the US Federal Open Market Committee meeting later in the day, forex dealers said.

At the interbank foreign exchange market, the rupee opened at 74.60 per dollar. It hovered in a range of 74.59 to 74.79 during the day, before ending at 74.62 against the greenback.

On Tuesday, the rupee had settled at 74.55 against the US dollar.

In the overseas markets, the dollar index edged higher on Wednesday afternoon trade in Asia ahead of the Fed’s monetary policy meeting minutes scheduled to be released later in the day.

Most Asian currencies were trading lower against the US dollar, while crude oil's upside remained intact and also weighed on the rupee.

Brent crude futures, the global oil benchmark, advanced 1.69 per cent to $75.79 per barrel.

"The highlight event is tonight's FOMC minutes which can set the mood until next Fed policy. The USDINR spot market is volatile ahead of the minutes on hopes that it may indicate timing of tapering the quantitative easing," said Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services.

"If the minutes suggest a delay in tapering due to the risk of the economic outlook, we could see a reversal in USDINR spot. The immediate resistance is around the 74.95-75 zone, while the immediate support is at 74.50-74.25. Only a consistent trading above 75 will open the doors for 75.25," Gupta said.

On the domestic equity market front, the BSE Sensex ended 193.58 points or 0.37 per cent higher at 53,054.76, while the broader NSE Nifty advanced 61.40 points or 0.39 per cent to 15,879.65.

Foreign institutional investors were net sellers in the capital market on Tuesday as they offloaded shares worth Rs 543.30 crore, as per exchange data.

"The Indian rupee ended weaker for a second straight session on Wednesday against the US dollar on weak risk appetite due to worries over slowdown in the pace of economic recovery," Sriram Iyer, Senior Research Analyst at Reliance Securities, said.

In the last two trading sessions, the rupee has lost 31 paise against the dollar.

Meanwhile, oil and telecom companies continued to buy dollars and pushed the USDINR spot pair briefly to 74.79. However, foreign banks selling dollar capped upside in the pair, Iyer added.

Fitch Ratings on Wednesday cut India's growth forecast to 10 per cent for the current fiscal, from 12.8 per cent estimated earlier, due to slowing recovery post second wave of COVID-19, and said rapid vaccination could support a sustainable revival in business and consumer confidence.