The Indian rupee appreciated by 4 paise to 83.97 against the US dollar in early trade on Thursday. This movement was driven by a weakening of the American currency in the international market and a positive trend in domestic equities.
Forex traders attributed the rupee’s rise to a combination of factors, including a decline in crude oil prices and inflows of foreign funds, which bolstered investor sentiment. At the interbank foreign exchange market, the rupee opened at 83.98, and then improved slightly to touch 83.97, marking a gain of 4 paise from its previous close.
On Wednesday, the rupee had breached the crucial 84-mark for the second time in a month, settling 3 paise lower at 84.01 against the American currency. Despite the recent appreciation, the rupee continues to show signs of weakness. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that despite the rise of Asian currencies, the Indian rupee remains under pressure. He explained that inflows into the Indian market are being absorbed by the Reserve Bank of India (RBI), while oil companies, foreign portfolio investors (FPIs), and importers are actively purchasing US dollars, keeping the rupee lower despite gains seen by other Asian and emerging market currencies.
The dollar index, which measures the strength of the US dollar against a basket of six major currencies, was down 0.03 percent to 101.32 points. This decline in the dollar index contributed to the rupee’s appreciation.
In the international oil market, Brent crude, the global benchmark, rose by 0.19 percent to USD 72.84 per barrel in futures trade. Forex traders indicated that crude oil prices at around USD 72 per barrel would provide support for the domestic currency. As the world’s third-largest oil importer, India stands to benefit from lower oil prices, which can positively impact the rupee.
In the domestic equity market, the 30-share BSE Sensex gained 27.21 points, or 0.03 percent, reaching 82,379.85 points. Similarly, the Nifty index was up by 10.45 points, or 0.04 percent, to 25,209.15 points. The positive movement in the equity market contributed to the overall sentiment in the currency market.
Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Wednesday. They purchased shares worth ₹975.46 crore, according to exchange data. This strong buying interest from FIIs provided further support to the rupee, as increased foreign investments contribute to the currency’s appreciation.
Overall, the appreciation of the rupee can be attributed to a favorable combination of weaker US dollar, supportive oil prices, positive domestic equity trends, and strong foreign investment inflows.
