The Indian rupee has demonstrated remarkable resilience against the US dollar, marking its third straight day of gains. Among Asian currencies, the rupee has emerged as a standout performer, exhibiting notable strength in recent trading sessions. This upward momentum, which commenced on Tuesday, extended into Thursday, reflecting growing optimism in India’s currency market.
Rupee’s Consistent Rise in Value
On Wednesday, the rupee maintained its upward trajectory for the majority of the trading session, although it experienced a minor dip post-market hours. Experts attribute the rupee’s robust performance to the Reserve Bank of India’s (RBI) intervention and favorable inflation data in India. Additionally, inflation figures in the United States surpassed expectations, influencing currency market movements. Analysts suggest that this positive trend for the rupee could persist in the coming days.
Interestingly, other major Asian currencies, including those of China and Japan, have struggled to mirror the rupee’s strength. On Tuesday, the Indian rupee surged by nearly one percent, marking its most significant single-day gain in two years. The positive momentum continued on Wednesday with a 27-paise appreciation against the dollar. By Thursday, the rupee further strengthened by 14 paise, underscoring its growing stability.
Current Trading Level of the Rupee
In early trade on Thursday, the rupee appreciated by 14 paise to reach 86.81 against the US dollar. This uptrend was supported by a weakening dollar and a decline in global crude oil prices. Currency traders noted that the local unit, previously under pressure from sustained foreign fund outflows, found relief due to improved domestic equity market performance and favorable inflation data.
At the interbank foreign exchange market, the rupee opened at 86.82 and quickly rose to 86.81 in early trade, compared to its previous close of 86.95. On Wednesday, the rupee had depreciated by 16 paise, ending the session at 86.95. However, Tuesday saw an impressive gain of 66 paise, closing at 86.79—its largest single-day surge since March 3, 2023.
Declining Strength of the US Dollar
Simultaneously, the US dollar index, which measures the dollar’s performance against a basket of major currencies, has shown signs of weakening. As of Thursday, the index was trading at 107.59, reflecting a 0.22 percent decline. Over the past month, the dollar index has decreased by 1.20 percent, while it has slipped by 0.77 percent in the current year. However, on an annual basis, the index remains up by 3.21 percent.
Experts caution that currency markets remain volatile, with ongoing tensions between the dollar and the rupee likely to continue. The uncertainty is fueled by global trade policies, particularly concerns linked to the US administration’s stance on trade.
Factors Behind the Dollar’s Weakness
Analysts point to the recent release of higher-than-expected inflation data in the US as a primary driver behind the dollar’s decline. The data dampened expectations of an imminent interest rate cut by the Federal Reserve. Additionally, global oil benchmark Brent crude futures fell by one percent to $74.43 per barrel, further contributing to the dollar’s weakness.
In the domestic stock market, investor sentiment remained upbeat. The benchmark BSE Sensex rose by 441 points to reach 76,597.42, while the Nifty advanced by 136 points to 23,181.45. Despite the positive market mood, foreign institutional investors (FIIs) were net sellers, offloading equities worth Rs 4,969.30 crore on Wednesday, according to stock exchange data.
Outlook for the Rupee
Market observers believe that the rupee’s performance will largely depend on global economic developments and domestic economic indicators. While the RBI’s support and easing inflation have provided a boost, uncertainties surrounding US monetary policy and global trade dynamics could influence future movements. For now, the rupee continues to exhibit resilience, bringing a sense of stability to India’s currency market.
