The Indian rupee appreciated by 3 paise to close at 83.56 (provisional) against the US dollar on Wednesday, buoyed by a robust domestic market where the benchmark Nifty index soared to a fresh all-time high.
Forex traders noted that the rupee traded in a narrow range throughout the session as market participants eagerly awaited the US May Consumer Price Index (CPI) report and the US Federal Reserve’s impending rate decision. On the domestic front, attention was also on India’s CPI data, which could provide further insights into the country’s economic health.
The strength of the US dollar in overseas markets, coupled with elevated crude oil prices, however, limited the rupee’s gains.
At the interbank foreign exchange market, the rupee opened at 83.56. During the trading session, it reached an intraday high of 83.51 and a low of 83.56. The rupee eventually closed at 83.56, marking a modest increase of 3 paise from its previous closing level of 83.59 on Tuesday.
“The Indian rupee appreciated on positive domestic markets as Nifty touched a fresh all-time high. However, a strong US dollar and rising crude oil prices capped sharp gains,” said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
Choudhary added, “We expect the rupee to trade with a slight negative bias as the US dollar is expected to strengthen amid expectations of no change in the Federal Open Market Committee (FOMC) meeting. Investors will be closely watching Fed Chair Jerome Powell’s speech for cues
on potential rate cuts. Additionally, traders will look for signals from India’s CPI and IIP data as well as the US CPI figures. The USD-INR spot price is expected to trade in a range of Rs 83.20 to Rs 84.”
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, was trading at 105.20, down by 0.03 percent. The US dollar gained on expectations of a further delay in the Federal Reserve’s first interest rate cut.
In the commodities market, Brent crude futures, the global oil benchmark, rose by 1.11 percent to $82.83 per barrel, adding pressure on the rupee.
On the domestic equity front, the 30-share BSE Sensex advanced 149.98 points, or 0.20 percent, to close at 76,606.57 points. The broader NSE Nifty also performed strongly, climbing 58.10 points, or 0.25 percent, to reach an all-time high of 23,322.95 points.
Despite the positive momentum in equities, Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth Rs 111.04 crore, according to exchange data.
The nuanced interplay between a strengthening domestic market and external economic factors continues to shape the rupee’s performance, making it a focal point for investors navigating the complexities of global trade and finance. As market participants await key economic data and policy announcements, the rupee’s trajectory remains closely tied to both domestic indicators and international developments.