The Indian rupee staged a strong recovery on Tuesday, surging by 71 paise to settle at 93.51 against the US dollar, reversing its recent downtrend. The gain was driven by a rebound in domestic equity markets and a decline in the dollar index globally.
Market Dynamics
At the interbank foreign exchange market, the rupee opened on a positive note at 94.00 and gradually strengthened during the day to touch an intraday high of 93.40. It finally closed at 93.51, marking a sharp improvement from the previous close of 94.22. The recovery was supported by sustained selling of the US dollar by exporters and banks, along with fresh inflows of foreign funds into Indian equities.
Equity Market Support
Domestic benchmark indices ended higher, with the BSE Sensex climbing 456 points or 0.78% to 58,853, and the NSE Nifty gaining 135 points or 0.77% to 17,556. The positive sentiment in equities encouraged currency traders to pare their long dollar positions, aiding the rupee's recovery.
Global Cues
Meanwhile, the dollar index, which measures the greenback against a basket of six major currencies, slipped 0.3% to 104.20, providing further support to the rupee. A weaker dollar makes emerging market currencies like the rupee more attractive.
Forex Reserves and Oil Prices
India's foreign exchange reserves remain robust, providing a cushion against external shocks. On the commodity front, Brent crude oil prices traded around $95 per barrel, easing from recent highs, which also eased pressure on the rupee as India is a major oil importer.
Outlook
Analysts expect the rupee to remain range-bound in the near term, with support at 94.00 and resistance at 93.00. The trajectory will depend on further cues from global markets, the US Federal Reserve's monetary policy stance, and domestic macroeconomic data.
