Re turns weaker on rising Greenback

Mumbai: The rupee pared initial gains to settle 7 paise lower at 81.88 against the American currency on Tuesday, as elevated crude oil prices and a muted trend in domestic equities weighed on investor sentiments.

Forex traders said the strengthening of the American currency in the overseas market further dented investor sentiments. At the interbank foreign exchange, the domestic unit opened at 81.74 against the dollar and touched an early high of 81.67 in initial deals. The local unit, however, pared initial gains and finally ended the day at 81.88 (provisional), down 7 paise from its previous close. On Monday, the rupee had settled at 81.81 against the dollar. The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced 0.12 per cent to 101.46. Brent crude futures, the global oil benchmark, declined marginally by 0.18 per cent to $82.59 per barrel.

“In the wake of a strong handover of West and Asian currencies, the Indian rupee opened a gap-up, but RBI might have intervened in the market along with the dollar demand from hedgers erasing the gains,” said Dilip Parmar, Research Analyst, HDFC Securities. Inflows of foreign funds and a weaker greenback are likely to benefit the rupee, but a sharp appreciation may not be appropriate when we hold a large amount of foreign exchange reserves ($600 billion), Parmar said.