Rupee Climbs Against Dollar Amid Easing Crude Prices, but Gains Limited by Market Volatility
The Indian rupee displayed a marked recovery on Wednesday, appreciating 27 paise to settle at ₹86.52 against the US dollar. This positive trend follows a similar upward trajectory seen in the previous session, driven by a combination of easing crude oil prices and strategic measures implemented by the Reserve Bank of India (RBI).
Recovery from Previous Lows
At the interbank foreign exchange market, the rupee made an impressive start, opening at ₹86.44 and reaching a high of ₹86.36 before settling at ₹86.52 during early trading hours. This increase follows a notable gain on Tuesday when the rupee surged by 66 paise, marking its most significant one-day gain since March 3, 2023, and closing at ₹86.79 per dollar.
This upward movement comes in stark contrast to the recent lows the rupee experienced on Monday, where it momentarily dipped to nearly ₹88 per dollar during intraday trading. The currency managed to stage a rally in the latter part of the day, ultimately closing at ₹87.45 against the dollar.
Global Factors Influencing Exchange Rates
While the rupee has made gains against the dollar, various external factors are influencing the currency’s performance. Forex traders point out that the rise in the rupee’s value has been tempered by heightened volatility in the domestic equity markets, investor apprehension following significant foreign fund outflows, and a strengthening dollar amid ongoing global trade tensions.
The US dollar index, which measures the currency’s strength against a basket of other currencies, was trading slightly up by 0.07% at 107.91. This increase in dollar strength has been linked to rising trade tensions, particularly after the United States recently imposed a 25% tariff on aluminium and steel imports.
Crude Oil Prices and Domestic Market Performance
In the commodities sector, Brent crude, the global oil benchmark, saw a slight decrease of 0.31%, falling to USD 76.36 per barrel in futures trade. Lower crude prices have been a supportive factor for the rupee’s recovery, alleviating some inflationary pressures on the Indian economy.
In the domestic equity market, however, the performance has been less than stellar. The 30-share BSE Sensex was down by 259.89 points, or 0.34%, trading at 76,033.71 points. Similarly, the Nifty index experienced a decline of 72.40 points, or 0.31%, settling at 22,999.40 points.
Foreign Institutional Investment Trends
Adding to the concerns around the rupee’s stability, foreign institutional investors (FIIs) have been actively selling off equity positions in the Indian capital markets. On a net basis, FIIs sold equities worth ₹4,486.41 crore on Tuesday, reflecting a cautious outlook among international investors amid fluctuating market conditions.
In conclusion, while the rupee has shown resilience against the dollar, various macroeconomic factors, including global trade issues, equity market volatility, and foreign fund movements, continue to shape its trajectory. Investors and traders remain vigilant as these dynamics evolve in the coming days.
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