Forex traders said news of dollar selling by public sector banks backed the rupee. However, higher crude oil costs restricted the gains in the local unit.
The Indian rupee appreciated by 13 paise to settle at 83.42 (provisional) against the US dollar on Tuesday, driven by fresh foreign capital inflows and a strong trend in domestic equity markets.
The benchmark indices scaled new peaks, further bolstering the rupee.
Market Dynamics
At the interbank foreign exchange market, the rupee opened at 83.52 and reached an intraday high of 83.39 against the greenback.
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It ultimately closed at 83.42, marking a 13 paise gain from its previous close. On Friday, the rupee had settled 1 paisa lower at 83.55 against the US dollar. The forex markets were closed on Monday due to Bakri Id.
Influencing Factors
Foreign Capital Inflows and Market Performance
Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas, attributed the rupee’s gain to the domestic markets hitting new all-time highs and fresh foreign fund inflows. Reports of dollar selling by public sector banks also supported the currency.
Crude Oil Prices and Dollar Strength
Despite the positive sentiment, higher crude oil prices capped the rupee’s gains. The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading at 105.06, up by 0.12%.
Analysts noted that the US dollar gained strength following hawkish comments from US Federal Reserve officials and ahead of key economic data releases, including retail sales and industrial production.
Oil Market Movements
Brent crude futures, the global oil benchmark, declined by 0.33% to USD 83.97 per barrel, offering some relief to the rupee.
Equity Market Highlights
In the domestic equity market, the 30-share BSE Sensex rose by 308.37 points (0.40%) to close at a new peak of 77,301.14 points. The broader NSE Nifty also settled higher, gaining 92.30 points (0.39%) to close at an all-time high of 23,557.90 points.
Future Outlook
Choudhary expects the USD-INR spot price to trade within a range of Rs 83.10 to Rs 83.70, influenced by ongoing market conditions and further economic indicators from the US.
In summary, the rupee’s appreciation was supported by robust domestic equity markets and fresh foreign capital inflows, although higher crude oil prices and a strong dollar limited further gains.
