Rupee Strengthens Slightly Against US Dollar Following US Waiver on Russian Oil Purchases
The Indian rupee appreciated by 2 paise to close at 91.62 against the US dollar on Friday, marking a modest recovery in the foreign exchange market. This slight gain came in response to a significant development from the United States government, which announced a 30-day waiver permitting Indian refiners to continue purchasing Russian oil.
US Waiver Aims to Ease Global Energy Supply Pressures
The waiver decision arrives amidst ongoing geopolitical tensions in West Asia, particularly involving conflicts between Israel and Iran. US Treasury Secretary Scott Bessent clarified the rationale behind this temporary measure on Thursday, stating, "This stop-gap measure will alleviate pressure caused by Iran's attempt to take global energy hostage." The move is strategically designed to mitigate disruptions in global energy supplies and stabilize market conditions.
Forex Market Dynamics and Domestic Factors
At the interbank foreign exchange market, the rupee opened trading at 91.64, matching its previous session's closing level. It then edged upward to settle at 91.62 against the greenback, as reported by PTI. This follows a notable recovery on Thursday, where the currency had gained 41 paise to close at 91.64, after experiencing a substantial decline of 97 paise over the preceding two trading sessions.
Forex traders observed that despite a weakening US dollar internationally, the rupee's upward movement was constrained by two primary domestic factors:
- Negative Domestic Equity Markets: Indian stock indices faced significant downward pressure during early trade.
- Foreign Fund Withdrawals: Foreign institutional investors continued to pull capital out of Indian equities.
The dollar index, which measures the US currency's strength against a basket of six major global currencies, declined by 0.37 percent to 98.94, indicating broader dollar weakness that typically supports emerging market currencies like the rupee.
Global Oil Prices and Domestic Equity Performance
Supporting calmer energy market sentiment, global oil prices experienced a downward correction. Brent crude futures, the international benchmark, fell by 1.05 percent to $84.51 per barrel. This easing in oil prices provided some relief to energy-importing nations like India.
On the domestic equity front, markets remained under substantial pressure during early trading hours. The benchmark Sensex dropped 388.23 points, equivalent to 0.49 percent, to settle at 79,627.67. Similarly, the Nifty index declined by 118.30 points, or 0.48 percent, closing at 24,647.60.
Exchange data revealed that foreign institutional investors were net sellers in the equity market on Thursday, offloading shares worth Rs 3,752.52 crore. This continuous outflow of foreign capital contributed to the rupee's limited gains despite favorable international factors.
The interplay between the US waiver on Russian oil, global energy market dynamics, domestic equity performance, and foreign investment flows created a complex trading environment for the Indian rupee, resulting in modest strengthening against the US dollar on Friday.
