The rupee depreciated by as much as 16 paise – or 0.22 per cent – against the US dollar on Thursday, a day after macroeconomic data pointed to worsening inflation and shrinking industrial output. After starting the session at 71.37 against the greenback, the rupee slid to as low as 71.49 by afternoon as against its previous close of 71.33. It was last seen trading down 14 paise – or 0.21 per cent – at 71.48 against the US currency.
Official data on Wednesday showed consumer inflation worsened to a 68-month high of 7.59 per cent in January due to high food prices.
Separate data showed that industrial production or factory output – gauged by the Index of Industrial Production (IIP) – contracted 0.3 per cent in December, following its first rise in three months in November.
Weakness in the domestic equity markets with the benchmark index S&P BSE Sensex falling more than 200 points – or 0.49 per cent – also put pressure on the rupee in the forex markets.
Crude oil prices were mixed on Thursday as concerns about falling demand caused by travel restrictions tied to the coronavirus outbreak in China outweighed expectations of supply cuts from major producers.
Brent crude – the global benchmark for crude oil – were last seen trading 0.1 per cent down to $55.71 per barrel. A slowdown in new Chinese coronavirus cases boosted expectations of a demand recovery. India meets more than 80 per cent of its oil requirements through imports.
“The range of rupee has been getting narrower in the past few sessions and volatility drying up to its lowest in the last couple of months,” said CR Forex Advisors, a forex advisory firm.
CR Forex Advisors said it expects the rupee to move in a tight range, between 71.10 and 71.50 against the greenback going forward, “which can be an alarm for an upcoming breakout”.
The rupee is down 0.15 per cent against the dollar so far this year.