The Indian rupee strengthened by 10 paise to close at 94.45 against the US dollar on Thursday, according to a report by PTI, supported by easing global crude oil prices, a positive domestic equity market, and a marginally weaker greenback, though foreign fund outflows capped further gains.
Currency Movement and Key Drivers
At the interbank foreign exchange market, the rupee opened at 94.30 against the dollar and traded in a 94.13-94.56 range before settling at 94.45, up from Wednesday's close of 94.55. The currency had appreciated 21 paise in the previous session. The forex market will remain closed on Friday on account of Muharram.
Supporting the rupee were:
- Crude oil prices: Brent crude, the global oil benchmark, declined 1.33% to USD 72.76 a barrel in futures trade, according to the report.
- US dollar weakness: The dollar index, which measures the greenback against a basket of six currencies, was trading 0.04% lower at 101.57.
- Domestic equities: The Sensex rose 109.25 points to close at 77,100.47, while the Nifty advanced 34.35 points to 24,056.
- Foreign institutional investment: Exchange data showed that foreign institutional investors (FIIs) bought equities worth Rs 383.76 crore on a net basis on Thursday. However, the report noted that foreign fund outflows capped the rupee's gains, suggesting earlier selling pressure may have been reversed.
Analyst Comment
Anuj Choudhary, Research Analyst at Mirae Asset ShareKhan, commented on the rupee's movement:
"The rupee strengthened on falling commodity prices and softening of the US dollar. Weakness in crude oil prices and positive domestic markets also favoured the rupee."
Looking ahead, Choudhary added:
"We expect the rupee to trade with a negative bias on overall strength in the US dollar due to the hawkish Federal Reserve. However, softening of commodity prices and easing concerns over inflation may support the rupee at lower levels."
He pegged the expected trading range for the rupee at 94.20-94.80.
Market Context and Trade Implications
The following table summarises key market data from the session:
| Indicator | Value | Change/Note |
|---|---|---|
| USD/INR close | 94.45 | +10 paise from Wednesday |
| Dollar index | 101.57 | -0.04% |
| Brent crude futures | USD 72.76/barrel | -1.33% |
| Sensex | 77,100.47 | +109.25 points |
| Nifty | 24,056 | +34.35 points |
| FII net equity purchase | Rs 383.76 crore | Net buyers on Thursday |
For corporate treasurers and trade finance professionals, the rupee's appreciation against the dollar reduces the cost of importing goods and services priced in USD, particularly crude oil, which is India's largest import. The lower Brent price strengthens this effect, potentially improving margins for oil-dependent industries such as petrochemicals, transportation, and refining. However, a stronger rupee can weigh on export competitiveness, especially for sectors like IT services, textiles, and pharmaceuticals that earn revenues in dollars but report in rupees. The gain in domestic equities and FII buying signals continued foreign investor interest, which supports capital inflows and overall balance of payments stability. The expected range of 94.20-94.80 suggests limited near-term volatility, but the hawkish Federal Reserve stance may exert downward pressure on the rupee in the coming weeks. The Muharram holiday on Friday will pause spot trading, giving market participants time to assess global cues before resuming on Monday.
Sources:
