The Indian rupee made a modest recovery on Thursday, appreciating by 9 paise to close at 83.31 (provisional) against the US dollar, bolstered by a weakening American currency and declining crude oil prices in the international market.
The rupee’s rebound comes after it plunged 22 paise on Wednesday, marking a two-day losing streak. The interbank foreign exchange market saw the rupee open at 83.42, with fluctuations between an intra-day high of 83.26 and a low of 83.44, before settling at 83.31.
Forex traders highlighted that despite the positive cues from the softer dollar and oil prices, the rupee’s gains were capped by significant selling in domestic equity markets, foreign fund outflows, and increased month-end demand for the greenback by oil marketing companies.
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, noted, “The rupee, which fell in the first half of the day due to weak domestic markets and FII outflows, appreciated on the softening of the US dollar as US treasury yields eased after rising over the past three days.”
The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.12% lower at 104.90. This contributed to the rupee’s recovery as it provided some relief against the backdrop of a generally strong US dollar driven by hawkish comments from Federal Reserve officials.
Choudhary added, “Overall strength in the US dollar amid the hawkish tone of US Federal Reserve officials may further pressure the rupee. However, any further easing of US treasury yields or intervention by the RBI may support the rupee at lower levels.” He projected the USD-INR spot price to trade within a range of Rs 83.10 to Rs 83.70.
In the commodities market, Brent crude futures, the global oil benchmark, declined by 0.32% to USD 83.33 per barrel, contributing to the positive sentiment for the rupee.
On the domestic front, the equity markets experienced a sharp decline. The 30-share BSE Sensex fell by 617.30 points, or 0.83%, to close at 73,885.60 points, while the broader NSE Nifty dropped by 216.05 points, or 0.95%, to settle at 22,488.65 points. Foreign Institutional Investors (FIIs) were net sellers, offloading shares worth Rs 5,841.84 crore on Wednesday, according to exchange data.
Market participants are now looking ahead to a series of domestic and global macroeconomic data releases expected this week, which could provide further direction for the currency and equity markets.