The Indian rupee saw a modest appreciation of 5 paise to close at 83.03 (provisional) against the US dollar on Wednesday, buoyed by positive sentiments in the domestic equities market. Despite facing headwinds from the strength of the American currency in global markets and elevated crude oil prices, the rupee managed to edge higher, albeit with limited gains.
At the interbank foreign exchange, the rupee opened at 83.11 against the greenback, reaching an intraday high of 83.02 and a low of 83.12 before settling at 83.03 (provisional), marking a 5 paise increase from its previous close of 83.08.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, commented on the factors influencing the rupee’s movement, stating, “We expect the rupee to trade with a slight negative bias on the back of a strong US dollar and risk aversion in global markets. Rising crude oil prices may also put pressure on the rupee.” Choudhary noted that any potential recovery in domestic markets could lend support to the rupee at lower levels.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was trading marginally lower at 104.92, down by 0.04 percent.
Choudhary highlighted the impact of higher-than-expected inflation data from the United States on the US dollar’s performance, stating, “US Dollar bounced back on hotter-than-expected inflation. This led to a decline in expectations of a rate cut by the Federal Reserve in March and May 2024.” Additionally, Brent crude futures, the global oil benchmark, registered a slight uptick of 0.16 percent, reaching USD 82.90 per barrel.
On the domestic front, the wholesale price index (WPI)-based inflation eased to a three-month low of 0.27 percent in January, primarily driven by a moderation in food prices, including vegetables. Furthermore, the Indian equity market witnessed positive momentum, with the Sensex advancing 267.64 points, or 0.37 percent, to reach 71,822.83, while the Nifty rose by 96.80 points, or 0.45 percent, closing at 21,840.05.
Foreign Institutional Investors (FIIs) remained net buyers in the capital markets on Tuesday, with purchases amounting to shares worth Rs 376.32 crore, according to exchange data.
The outlook for the USD-INR spot price is anticipated to fluctuate within a range of Rs 82.80 to 83.40, with traders keeping a cautious stance ahead of key economic indicators such as India’s trade balance and US retail sales data.
