Investors saw minutes of the Federal Reserve meeting, which was interpreted by forex traders as a sign that the US central banking might raise interest rates faster to cool inflation. This could cause outflows from domestic markets.
Minutes from the Fed’s December 14-15 policy conference show that policymakers believe that the US job market has reached a point where it is healthy enough to allow for ultra-low interest rates.
The rupee opened at 74.444 against the US Dollar, which was 6 paise lower than the previous close. In the initial deals, the domestic unit saw a peak of 74.34.
The rupee climbed 20 paise against the US currency on Wednesday to close at 74.38. The dollar index, which measures the strength of the greenback against a basket made up six currencies, rose 0.02 percent to 96.19.
Reliance Securities stated in a research note that the Indian Rupee opened flat or marginally weak Thursday. This was due to the strength of both the dollar and weak Asian peers.
It added that a faster than expected rate hike by the US Fed could lead to outflows from domestic markets, which could impact sentiments.
The local unit was also affected by growing concerns about the Omicron coronavirus variant and its effect on economic recovery, as well as on firm crude oil prices.
Brent crude oil futures for global benchmark fell 1.35 percent to USD 79.71 a barrel. The domestic equity market was down by 717.2 points, or 1.19 percent, at 59.505.95. Meanwhile, the NSE Nifty fell 198.85 to 17,726.40.