Rupee falls 17 paise to 95.59 against US dollar as cautious sentiment weighs on currency

The rupee depreciated 17 paise to 9559 against the US dollar in early trade on Monday as a cautious market environment and concerns over future foreign currency inflows weighed on the domestic currencyForex traders said investor sentiment turned cautious after the Reserve Bank of India RBI announced on August 14 that its swap facility for FCNR B deposits would be available only for deposits mobilised until August 31 The earlier cutoff date for Foreign Currency NonResident Bank or FCNR B deposits was September 30RBI decision raises concerns over future forex inflowsUnder the FCNR B scheme banks offer attractive interest rates to mobilise foreign currency deposits from eligible nonresident depositorsThe RBI on Friday said its concessional swap facility introduced to encourage foreign currency inflows had attracted USD 5684 billion as of August 13The change in the cutoff date has prompted market participants to assess whether foreign currency inflows under the scheme will remain as strong once the facility expires While the inflows have provided support to the rupee traders are also looking at how the currency may perform after this temporary source of foreign exchange support fadesAfter attracting nearly USD 50 billion of forex inflows the central bank has now announced that the facility will be available only for deposits mobilized until August 31 2026 The support from these inflows remains significant but the market will eventually begin looking beyond this temporary cushion CR Forex Advisors MD Amit Pabari saidRupee opens lower against US dollarAt the interbank foreign exchange the rupee opened at 9550 and subsequently declined to 9559 down 17 paise from its previous closeOn Friday the rupee had appreciated 3 paise to close at 9542 against the US dollarPabari said the domestic currency could remain supported in the near term although the broader riskreward equation appeared tilted towards weaknessWhile the rupee may remain supported in the near term the overall riskreward appears tilted towards weakness Pabari saidHe also pointed to key technical levels that could determine the currencys nearterm movementTechnically the 9520ndash9530 zone is likely to act as an important support area As long as this level holds USDINR could gradually move towards the 9620ndash9650 region in the coming days he saidDollar index and crude oil prices in focusThe dollar index which measures the strength of the US dollar against a basket of six major currencies was trading at 9954 down 012 per centGlobal crude oil prices also remained a factor for the rupee Brent crude the global oil benchmark was trading 047 per cent higher at USD 8894 per barrel in futures tradeHigher crude prices can put pressure on the Indian currency because the country is heavily dependent on imports to meet its energy requirements A sustained increase in oil prices can also widen the import bill and increase demand for dollarsWeak domestic equities add to pressureThe decline in the rupee came alongside weakness in the domestic equity market The 30share BSE Sensex declined 28485 points to 7771705 in early trade while the Nifty dipped 6925 points to 2429705Foreign Institutional Investors FIIs remained net buyers in Indian equities on Friday According to exchange data foreign institutional investors purchased equities worth Rs 50812 crore on a net basisForeign fund flows remain an important factor for the rupee as sustained inflows can increase the availability of dollars in the domestic market while outflows can have the opposite effectForex reserves rise sharplyIndias foreign exchange reserves provided another positive indicator The countrys forex reserves jumped USD 14136 billion to USD 707002 billion during the week ended August 7 according to data released by the RBI on FridayThe increase followed a rise of USD 10512 billion in the previous reporting week ended July 31 when the overall reserves stood at USD 692866 billionWith inputs from PTI