The Indian rupee started the trading session on a stronger note on Thursday, registering a notable gain against the US dollar. The domestic currency opened higher and strengthened further during initial deals, reflecting positive sentiment in the local markets.
Rupee's Performance and Key Levels
At the interbank foreign exchange market, the rupee commenced trading at 90.18 against the greenback. It then gained momentum, touching an early high of 90.12. This marked an appreciation of 18 paise from its previous close of 90.30. The currency's movement was closely watched by traders and analysts, with the 90.10-90.15 range becoming a focal point in early trade.
Forex market participants noted that the rupee's strength was primarily driven by two key factors. Firstly, the robust opening of Indian equity benchmarks provided strong support. Secondly, the continued inflow of foreign capital into domestic assets created demand for the rupee, pushing its value higher against the American currency.
Support from Equity Markets and Foreign Funds
The domestic stock markets served as a significant tailwind for the rupee. Both the BSE Sensex and the NSE Nifty 50 opened in positive territory and extended their gains. This bullish trend in equities often leads to increased foreign investor interest, which in turn benefits the local currency.
Data from exchange filings revealed that Foreign Institutional Investors (FIIs) were net buyers in the capital markets on the previous trading day. They purchased shares worth a net Rs 1,421.48 crore, as per provisional data. This sustained buying activity from foreign funds is a critical factor supporting rupee appreciation.
Meanwhile, the US dollar index, which measures the greenback's strength against a basket of six major currencies, was trading with a slight negative bias. It was down by 0.01% at 104.21. A weaker dollar index generally makes it easier for emerging market currencies like the rupee to gain ground.
Broader Market Context and Global Cues
The trading activity occurred against a backdrop of mixed global signals. In the commodities market, global oil benchmark Brent crude futures witnessed a decline. They fell by 0.39% to $82.86 per barrel. Lower crude oil prices are generally positive for India, a major importer, as they reduce the country's import bill and current account pressure, thereby aiding the rupee.
On the domestic front, traders and investors were also assessing broader economic indicators and liquidity conditions. The positive momentum in early trade suggested that market sentiment was leaning towards risk-on, favoring assets like the Indian rupee. However, analysts cautioned that currency markets remain susceptible to sudden shifts based on global risk appetite and central bank policies, particularly from the US Federal Reserve.
The rupee's performance will continue to be influenced by the trajectory of foreign fund flows, the movement of domestic equity indices, and the dynamics of the global dollar. Market observers will also monitor any intervention measures from the Reserve Bank of India (RBI) to manage excessive volatility, although the central bank often steps in to smooth sharp movements rather than target a specific level.
