The rupee appreciated 6 paise to 84.35 against the US dollar on Monday, bolstered by a strong trend in domestic equities. Analysts caution that elevated crude oil prices and a firm Dollar Index may impact long-term performance.
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The Indian rupee appreciated by 6 paise to settle at 84.35 against the US dollar in early trading hours on Monday, supported by positive domestic market trends. However, forex traders highlighted ongoing challenges posed by global factors, including elevated crude oil prices and a firm Dollar Index.
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At the interbank foreign exchange, the rupee opened at 84.38, trading in a tight range before settling at 84.35 against the greenback, marking a gain of 6 paise from its previous close. On Friday, the rupee had recovered from an all-time low, appreciating by 9 paise to close at 84.41 against the US dollar.
According to Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, the rupee's initial gains were supported by reduced Foreign Portfolio Investors (FPI) selling and last week's rally in domestic markets. Bhansali also noted that the Reserve Bank of India (RBI) has issued a warning to banks against speculative long positions in the USD/INR pair.
Meanwhile, the Dollar Index, which measures the strength of the greenback against a basket of six major currencies, declined by 0.58 per cent to 106.93. On the commodities front, Brent crude, the global oil benchmark, saw a slight dip of 0.21 per cent, trading at USD 75.01 per barrel in futures trading.
Despite these developments, forex analysts cautioned against excessive optimism. Elevated crude oil prices, which have surged nearly 5 per cent in the past week due to heightened tensions between Russia and Ukraine, and the general strength of the US dollar are expected to weigh on India's trade balance, potentially hindering sustained rupee appreciation.
Amit Pabari, Managing Director of CR Forex Advisors, stated, "The USD/INR pair is likely to trade within a defined range in the medium term, with support at 83.80 and resistance near 84.50. However, the overall bias leans towards the downside."
Domestic equity markets opened on a strong note on Monday, buoyed by the incumbent government’s election victory in Maharashtra. The BSE Sensex surged by 1,289.89 points to 80,407 in early trade, while the NSE Nifty climbed 405.25 points to 24,312.50. This follows Friday’s market rally, where indices gained nearly 2 per cent.
However, Foreign Institutional Investors (FIIs) remained net sellers in the capital markets on Friday, offloading shares worth ₹1,278.37 crore, according to exchange data.
The rupee's performance in the coming days will depend on global economic conditions, domestic market trends, and the RBI's intervention policies, forex traders observed.
(With inputs from PTI)
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