The Indian rupee appreciated by 63 paise to settle at 95.73 against the US dollar on Tuesday, marking its strongest closing level in over a week. The domestic currency opened stronger at 96.10 and touched an intraday high of 95.70 before closing at 95.73, compared to its previous close of 96.36.
Factors Behind Rupee's Rise
The rupee's gain was primarily attributed to a weak US dollar in global markets, as investors assessed the Federal Reserve's monetary policy trajectory. Additionally, positive sentiment in domestic equity markets supported the local unit. The BSE Sensex surged 456 points, while the Nifty 50 gained 134 points, reflecting broad-based buying.
Global Cues and Dollar Index
The US dollar index, which measures the greenback against six major currencies, declined 0.2% to 104.50, providing a tailwind for emerging market currencies like the rupee. A weaker dollar makes exports more competitive and reduces the cost of imported goods, benefiting economies like India.
Forex Reserves and Crude Oil
India's foreign exchange reserves stood at $586 billion as of the latest week, providing a cushion against external shocks. Meanwhile, Brent crude oil prices hovered around $82 per barrel, a key factor for India's import bill. Lower oil prices help contain the current account deficit and support the rupee.
Market Outlook
Analysts expect the rupee to trade in a range of 95.50 to 96.50 in the near term, with the direction dependent on global risk appetite and central bank actions. The Reserve Bank of India's intervention in the forex market also remains a crucial factor in curbing excessive volatility.
The rupee's upward move comes amid a broader recovery in Asian currencies, with the Chinese yuan and South Korean won also gaining against the dollar. Market participants will now focus on US economic data and Fed commentary for further cues.
