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Indian Rupee: Likely To Extend Gains
23-Feb-21   09:08 Hrs IST

The Indian rupee is likely to extend gains against the dollar in early trades on Tuesday, 23 February 2021 tracking sustained foreign fund inflows even as equities retreat slightly. Rising COVID-19 cases and negative global cues also weighed down investor sentiment. However, dollar weakness overseas could lend some support.

On Monday, rupee gained 16 paise to settle at 72.49 against the US dollar. At the interbank forex market, the local unit opened at 72.58 against the greenback and witnessed an intra-day high of 72.29 and a low of 72.58. It finally ended at 72.49 against the American currency, registering a rise of 16 paise from its previous close. On Thursday, the rupee had settled at 72.65 against the American currency. The forex market was shut on Friday on account of Chhatrapati Shivaji Maharaj Jayanti.

Domestic shares plunged on Monday with the Nifty falling below the 14,700 mark. Rising COVID-19 cases and negative global cues spoiled sentiment. The barometer index, the S&P BSE Sensex, slumped 1,145.44 points or 2.25% to 49,744.32. The Nifty 50 index lost 306.05 points or 2.04% to 14,675.70. Foreign portfolio investors (FPIs) sold shares worth Rs 893.25 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 919.88 crore in the Indian equity market on 22 February, provisional data showed.

Overseas, Asian stocks are trading mixed on Tuesday, as investors monitored technology stocks regionally after their counterparts declined overnight on Wall Street. Markets in Japan are closed on Tuesday for a holiday. In US, the S&P 500 and Nasdaq closed lower on Monday as climbing Treasury yields and prospects of rising inflation triggered valuation concerns, hitting shares of high-flying growth companies.

The U.S. House of Representatives Budget Committee on Monday approved legislation with $1.9 trillion in new coronavirus relief, advancing a top priority of President Joe Biden toward a full House vote on passage expected later this week. The measure passed the panel on a largely party-line vote of 19-16, as the U.S. death toll from the coronavirus pandemic surpassed the grim benchmark of 500,000 victims. Millions more have been left jobless by the pandemic.

All eyes will be on Federal Reserve Chairman Jerome Powell, who delivers his semi-annual testimony on the economy before the Senate Banking Committee on Tuesday. His comments on rates and inflation could determine the market direction for the week. On the pandemic front, the White House said that it expects to ship out millions of delayed coronavirus vaccine doses this week after a sweeping winter storm disrupted logistics. Gov. Andrew Cuomo said on Sunday that a New York resident has tested positive for the Covid-19 variant first identified in South Africa.

Meanwhile, the dollar was down on Tuesday morning in Asia, dropping to a near six-week low as investors await U.S. Federal Reserve chairman Jerome Powell's potential response to rising inflation worries. The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.14% to 89.957.

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