The Indian rupee strengthened by 11 paise to close at 95.63 against the US dollar on Friday, ahead of the Reserve Bank of India's (RBI) monetary policy decision. The local currency had settled at 95.74 against the greenback in the previous session.
Market Sentiment and Factors
Forex traders attributed the rupee's gain to a weak US dollar in global markets and positive domestic equity indices. The dollar index, which measures the greenback's strength against a basket of six major currencies, was trading lower, providing support to the rupee.
Meanwhile, domestic benchmark equity indices BSE Sensex and NSE Nifty were trading in positive territory, reflecting investor optimism ahead of the RBI's policy announcement. The central bank is widely expected to maintain the status quo on interest rates, but market participants will closely watch its commentary on inflation and growth outlook.
Key Levels and Outlook
The rupee moved in a range of 95.55 to 95.70 during the session, with traders citing likely intervention by the RBI to curb volatility. The currency has been under pressure in recent weeks due to sustained foreign fund outflows and rising crude oil prices.
Analysts expect the rupee to remain range-bound in the near term, with the RBI policy decision and global cues acting as key triggers. A dovish stance by the central bank could weigh on the currency, while any hawkish signals may provide further support.
On the macroeconomic front, India's foreign exchange reserves have been declining, but remain adequate to manage external shocks. The RBI's ability to manage currency volatility through intervention and policy measures will be crucial in the coming months.
