Rupee trades in narrow range against US dollar in early trade

The rupee witnessed range-bound trade and appreciated by just 1 paisa to 84.07 against the US dollar in initial deals on Monday, weighed down by significant foreign fund outflows and the strength of the American currency in the overseas market.

Forex traders said the rupee is likely to trade in a narrow range during the day as the strong dollar weighed on the local unit, while positive domestic equities, weak crude oil prices and any intervention by the Reserve Bank of India (RBI) may also support the local currency at lower levels.

At the interbank foreign exchange, the rupee opened at 84.08 against the greenback. In the initial trade, it touched 84.07, registering a rise of 1 paisa over its previous close.

• Also read: Currency Outlook: Dollar retains momentum

On Friday, the rupee edged lower by just 1 paisa to settle near an all-time low at 84.08 against the US dollar.

The local currency touched its lowest closing level of 84.10 against the dollar on October 11.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.28 per cent lower at 104.54.

Brent crude, the global oil benchmark, eased 4.39 per cent to $72.71 per barrel in futures trade.

According to traders, the rupee remains under intense pressure, mainly due to persistent foreign fund outflows.

According to CR Forex Advisors MD Amit Pabari, the rupee continues to hover around the 84 mark, a trend largely driven by the stronger dollar index through most of October.

"Given the lighter data schedule and Diwali festivities, trading volumes are likely to stay subdued this week. However, pressure on the Rupee is expected to persist until FII outflows ease, fuelled in part by high valuations in Indian equities," Pabari noted.

The USD-INR pair is anticipated to trade within a narrow range of 83.80 to 84.20, with downside support from the RBI’s reserves, he added.

On the domestic equity market front, Sensex advanced 209.10 points, or 0.26 per cent, to 79,611.39 points. The Nifty rose 13.55 points, or 0.06 per cent, to 24,194.35 points.

Foreign institutional investors (FIIs) were net sellers in the capital markets on Friday, as they offloaded shares worth ₹3,036.75 crore, according to exchange data.

Meanwhile, India's forex reserves dropped by $2.163 billion to $688.267 billion for the week ended October 18, the Reserve Bank said on Friday.

In the previous reporting week, the overall kitty had dropped by $10.746 billion to $690.43 billion in one of the largest declines in the reserves in recent times, the RBI said on Friday.