Rupee Strengthens by 10 Paise Against US Dollar: Factors Supporting the Currency
Rupee began Thursday on a positive note, recovering 10 paise to trade at 96.65 against the US dollar in early deals. This recovery comes amid likely intervention by the Reserve Bank of India, which may have helped the currency stabilize despite ongoing pressures from global and domestic factors. The rupee opened at 96.71 in the interbank foreign exchange market before moving up to 96.65, having ended at 96.75 against the dollar on Wednesday.
Despite the early recovery, forex traders noted that the rupee remains under pressure from a stronger US dollar, elevated crude oil prices, and sustained foreign fund outflows. The dollar index was trading near multi-month highs, while Brent crude remained around the $102-a-barrel mark. The decline in India’s forex reserves has further impacted investor sentiment, with reserves falling by $50 billion in three weeks from a peak of $786 billion in September.
“Strong corporate importer demand for dollars together with safe-haven capital shifts overpowered the RBI’s hawkish policy stance,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. He added that routine state-run bank interventions helped stem further losses in the USD/INR pair. Market participants are now looking towards the RBI for action against speculation in the currency pair, with traders noting that the RBI Governor has assured support to help the rupee find its true value.
Oil prices remain elevated, with Brent crude futures climbing 2.17% to $102.37 per barrel due to concerns over supply disruptions through the Strait of Hormuz. Bhansali pointed out that persistent worries over Middle East supply and shipping disruptions, particularly with recent attacks on tankers, are driving the rebound in crude oil prices.
The pressure on the rupee coincides with weakness in domestic equities. The BSE Sensex was down 264.97 points at 72,408.15 in early trade, while the NSE Nifty50 declined 87.50 points to 22,507.65. Foreign Institutional Investors (FIIs) were net sellers in Indian equities on Wednesday, offloading shares worth Rs 6,121.37 crore, according to exchange data.
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