Rupee Stabilizes Around 96 Amid Sustained Oil Prices Above $100 and Ongoing Foreign Selling
Rupee opened the week under pressure, trading at 96.20 against the US dollar. It weakened further to 96.26, marking a decline of one paisa from its previous close. High crude oil prices and ongoing foreign fund selling are contributing to the rupee’s struggles.
RBI Interventions and Market Sentiment
The Reserve Bank of India (RBI) has intervened periodically to curb excessive fluctuations in the currency. Despite these efforts, the rupee remains affected by rising import bills and the strength of the US dollar. The currency’s recent performance follows a notable drop on Thursday, closing at 96.25 per dollar after dipping below the critical 96 mark. The currency and equity markets were closed on Friday for Mahatma Gandhi Jayanti.
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, noted that the rupee is at its weakest in over two months. He indicated an upward bias for the USD/INR pair within the range of 95.50 to 96.50, driven by oil prices above $100, high US yields, and significant foreign portfolio selling. The RBI’s interventions are reflected in the decline of the country’s foreign exchange reserves, which fell by $18 billion to $748 billion.
Upcoming Economic Indicators
The RBI’s monetary policy committee is set to meet this week, with expectations of a 25 basis point rate increase to 5.50 percent. Market participants are closely monitoring several developments that could influence the USD/INR exchange rate. Key factors include US services data, the Federal Reserve’s minutes, and the RBI’s policy decision on Wednesday. Additionally, any confirmation of damage to Saudi infrastructure over the weekend could impact oil prices.
Banerjee mentioned that while a Federal Reserve decision to maintain its current stance in October and an RBI rate hike are already factored into the market, unconfirmed damage to Saudi oil facilities could quickly push Brent crude prices higher. The dollar index stood at 102.47, up 0.54 percent, while Brent crude futures were trading 0.89 percent lower at $101.34 a barrel.
Foreign Institutional Investors (FIIs) have continued to exert downward pressure on the rupee. They sold equities worth Rs 9,484.22 crore on a net basis on Thursday, according to exchange data. Despite this, the Indian equity market began Monday’s session positively, with the BSE Sensex rising by 413 points to 72,315 and the NSE Nifty gaining 131.55 points to trade at 22,554.20 in early trade.
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