NEW DELHI: After slumping to a near one-month low on Friday, the rupee opened marginally stronger against the US dollar on Monday as investors anticipated overseas flows for foreign firms’ investment in Indian companies and as some market participants felt that the selloff last week may have been overdone, dealers said.
The partially convertible rupee opened at 74.8250 per US dollar as against 74.8700/$1 at previous close. The domestic currency moved in a band of 74.8175-74.9100 to a dollar so far in the day.
The rupee shed close to 1 per cent against the US dollar last week as concerns over a new and potentially more dangerous strain of the coronavirus –dubbed Omicron- detected in some African countries and Hong Kong, cast a shadow on global growth prospects and sent investors rushing to safe-haven assets.
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While the dollar index on Monday retreated sharply from last week’s sixteen-month high of 96.95, the gauge was still above the psychologically significant 96 mark, last trading at 96.06. The dollar index measures the US currency against a basket of six rival currency pairs.
Hefty outflows of foreign institutional investment amid a slump in domestic equities had also dragged the rupee lower last week.
Currency traders remained jittery about FII outflows on Monday too.
Dealers said banks were likely to sell the greenback on behalf of exporters if the rupee were to head towards the 74.95-74.97/$1 levels.
“Rupee’s bias is towards depreciation because of the flight to safety and because if the new strain is a real risk to growth we could see even more selling in equities,” a dealer with a state-owned bank said on condition of anonymity.
“But given the fact that the RBI has such a strong war chest, we don’t see speculators being emboldened. Rather, the depreciation will happen in line with other EMs (emerging markets). 74.95-75.00/$1 will also see some exporter selling because frankly more details are needed about the new strain. Friday was a knee-jerk. Also, there are fresh IPOs (initial public offerings) this week, so some flows should come in,” he said.
Government bonds were steady, with yield on the 10-year benchmark 6.10 per cent 2031 bond trading one basis point higher at 6.34 per cent. Bond prices and yields move inversely.
Bonds had rallied Friday as the fresh risk to global growth led to hope of the RBI prolonging monetary accommodation.