Rupee Strengthens Against US Dollar in Early Trading Session
The Indian rupee opened the trading week on a positive note, appreciating by 21 paise against the US dollar during early trade on Monday. The domestic currency settled at 90.44, marking a notable recovery from its previous close of 90.65 on Friday. This upward movement reflects a shift in market sentiment driven by international developments and domestic economic indicators.
Trade Framework Announcement Boosts Market Confidence
Initial weakness saw the rupee open at 90.66 in the interbank market before swiftly rebounding. The turnaround was primarily fueled by optimism surrounding the newly finalized India–US trade framework, announced on Saturday. This interim agreement outlines plans to reduce import duties on several products, aiming to enhance bilateral commerce between the two nations.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, commented on the Reserve Bank of India's strategic interventions. "The RBI continues to act from both sides of the market, selling dollars on good upticks to curb excessive depreciation while also managing appreciation pressures following the US-India deal announcement," he stated. Bhansali noted that the central bank purchased dollars near the 90.05 level after the terms of reference were declared.
Supportive Factors Driving the Rupee's Performance
Several factors contributed to the rupee's positive undertone:
- Softer Dollar Index: The dollar index, which measures the greenback against six major currencies, edged lower by 0.05% to 97.58, providing relief to emerging market currencies like the rupee.
- Robust Domestic Equity Markets: Strength in Indian share markets added to the favorable environment for the rupee.
- Foreign Institutional Investment: Data revealed that Foreign Institutional Investors (FIIs) purchased shares worth Rs 1,950.77 crore on Friday, indicating continued foreign interest in Indian assets.
Key Highlights from the US-India Trade Agreement
In a joint statement, both countries disclosed significant commitments under the new framework. India has expressed its intention to procure US energy products, aircraft and aircraft components, precious metals, technology goods, and coking coal worth $500 billion over a five-year period. This substantial procurement plan underscores the deepening economic ties between the two nations.
Forex Reserves Reach Record High
In a separate development, the Reserve Bank of India reported a sharp increase in the country's foreign exchange reserves. The reserves kitty expanded by $14.361 billion to reach a new lifetime high of $723.774 billion for the week ended January 30. This follows a rise of $8.053 billion to $709.413 billion in the preceding week, surpassing the previous record of $704.89 billion set in September 2024.
Commodity Market Movements
Global commodity markets also displayed notable activity. Brent crude futures eased by 0.94% to $67.41 a barrel, which could have positive implications for India's import bill given the country's reliance on oil imports.
The rupee's performance on Monday highlights how international trade developments and central bank actions can swiftly influence currency markets. With the US-India trade framework setting a positive tone and robust forex reserves providing a buffer, the domestic currency appears well-positioned to navigate near-term volatility.
