The rupee plunged 43 paise to close at 88.26 (provisional) against the US dollar on Monday, as broad strength in crude oil prices and month-end dollar demand from importers weighed on investor sentiment.
Forex traders said the rally in crude oil prices was driven by a potential US-China trade deal, which supports expectations for a stronger global oil demand.
At the interbank foreign exchange, the rupee opened at 87.87 against the greenback and fell to an intra-day low of 88.31 and a high of 87.86. It finally closed the day at 88.26 (provisional) against the greenback, down 43 paise from its previous close.
On Friday, the rupee appreciated 5 paise to close at 87.83 against the US dollar.
Traders continue to watch developments around trade negotiations and geopolitical events for further cues.
“We expect the rupee to trade with a positive bias on improved domestic market sentiments amid optimism over the trade deal and strong domestic equities. Easing geopolitical tensions may also support the rupee.
“However, month-end dollar demand from importers and a surge in global crude oil prices may cap sharp upside. USDINR spot price is expected to trade in a range of 87.80 to 88.50,” said Anuj Choudhary, Research Analyst, Currency and Commodities, Mirae Asset ShareKhan.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.08 per cent lower at 98.86.
Brent crude, the global oil benchmark, was trading 0.85 per cent lower at $65.39 per barrel in futures trading.
On the domestic equity market front, the Sensex jumped 566.96 points to settle at 84,778.84, while the Nifty climbed 170.90 points to 25,966.05.
Foreign Institutional Investors purchased equities worth ₹621.51 crore on Friday, according to exchange data.
Meanwhile, India’s forex reserves increased by $4.496 billion to $702.28 billion during the week ended October 17, as the value of gold reserves rose further, the RBI said on Friday.
In the previous week, the overall reserves had jumped by $2.176 billion to $697.784 billion.