The rupee closed at a six-and-a-half-month high on Friday, strengthening to 93.90 against the US dollar. This gain followed net purchases by Foreign Portfolio Investors and falling crude oil prices. V Rama Chandra Reddy said, “The rupee continued its winning streak, closing at 93.90, a level last seen on April 22.”
The rupee (INR) closed at a six-and-a-half-month high on Friday, strengthening below the 94 mark per US dollar (USD), buoyed by Foreign Portfolio Investors (FPIs) net purchases in the equity markets, falling crude oil prices, and a weak dollar.
This comes amid hopes the Middle East war may cool off following the US President Donald Trump’s Republican Party suffering a reverse in the mid-term elections.
The Indian currency closed at 93.90 per USD, up 57 paise against the previous close of 94.47. Intraday, it tested a high/low of 93.8200/94.5150.
FPI’s net bought
Foreign Portfolio Investors (FPIs) net bought $1.724 billion on Friday, with risk-on sentiment returning to the Indian equity market in the last few days after Democrats became victorious in the mid-term elections.
Also, bolstering the rupee is the decline in crude oil price, which continues to hover below the $100 per barrel mark. India, whose importers account for about 90 per cent of its crude oil requirement, can procure this commodity cheaper, leading to less outflow of dollars.
V Rama Chandra Reddy, Head - Treasury, Karur Vysya Bank, said, “The rupee continued its winning streak, closing at 93.90, a level last seen on April 22. So, after crude oil softening, a sharp turnaround in global risk appetite post the US election outcome, the expectation of early resolution to the West Asia crisis and FII flows returning to Indian markets have strengthened the rupee.”
AI euphoria
Fading AI euphoria is also encouraging global portfolio diversification, with India emerging as a beneficiary of redirected flows, he added.
Amit Pabari, Managing Director, CR Forex Advisors, observed that the rupee’s recovery on Friday has been supported by renewed foreign investor inflows, easing crude oil prices and a weaker dollar.
He noted that the key factors that could support the rupee include lower crude oil prices; a favourable India-US yield differential; India’s strong growth outlook; renewed FPI inflows; and a cooling Dollar Index.
Pabari said, “We expect the rupee to maintain its positive bias in the near term, supported by easing crude oil prices, renewed FPI inflows and the cooling Dollar Index. A sustained break below 94.00 could accelerate rupee appreciation, potentially taking USD/INR towards 93.00 in the coming days.”
However, the sustainability of this recovery will largely depend on crude oil prices, continued foreign investor inflows and the broader direction of the Dollar Index.