The Indian rupee recovered from early weakness and gained 4 paise against the US dollar in early Thursday trading, supported by lower crude oil prices and measures taken by the Reserve Bank of India.
Mumbai : The Indian rupee staged a recovery in early trading on Thursday after opening on a weaker note against the US dollar. The domestic currency strengthened by 4 paise to trade at ₹95.40 per US dollar, supported mainly by easing crude oil prices and favourable foreign-exchange market conditions.
The recovery came after the rupee initially weakened following the opening of the foreign exchange market. The Indian forex market remained closed on Wednesday on account of Eid-e-Milad.
Rupee Opens Weak but Quickly Recovers
At the Interbank Foreign Exchange Market, the rupee opened at around ₹95.50 per US dollar on Thursday and initially slipped further to ₹95.52.
However, the currency soon recovered and moved to ₹95.40, marking a gain of 4 paise from its previous closing level.
On Tuesday, the rupee had recorded a stronger performance, gaining 26 paise to close at ₹95.44 per US dollar.
The latest movement indicates that the domestic currency continues to respond closely to developments in crude oil prices, foreign capital flows, dollar movements and Reserve Bank of India measures.
Falling Crude Oil Prices Provide Relief
One of the major factors supporting the rupee was the decline in international crude oil prices.
Brent crude, the global benchmark, fell below the $90-per-barrel mark after trading at elevated levels for several sessions. It was reported around $87.48 per barrel during the period under review.
Lower crude prices are generally positive for the Indian rupee because India is a major importer of crude oil. A reduction in oil prices can lower the country’s import bill and reduce demand for US dollars from oil-importing companies.
Strait of Hormuz Developments
Market sentiment also improved following reports of discussions between Oman and Iran regarding the creation of a temporary shipping corridor in the Strait of Hormuz.
Although no final agreement had been reached, the talks helped reduce concerns about a potential disruption to global oil supplies. The easing of supply-related fears contributed to the decline in crude oil prices and indirectly supported the Indian currency.
RBI Measures Also Support the Rupee
Forex market experts have also highlighted the role of the Reserve Bank of India (RBI) in supporting domestic currency stability.
According to the information available, the RBI purchased approximately $561 million from the market in June. This came after the central bank had been selling dollars for two consecutive months to help manage pressure on the rupee.
The RBI’s measures aimed at attracting foreign currency through instruments such as:
- Foreign Currency Non-Resident (FCNR-B) deposits
- External Commercial Borrowings (ECBs)
- Foreign institutional lending
have also contributed to foreign currency inflows.
By August 21, these measures had reportedly helped bring approximately $73 billion in foreign funds into the country.
Special Deposit Scheme Could Continue Supporting Rupee
Market experts believe that the special deposit-related measures, which remain available until August 31, could continue to provide support to the rupee in the near term.
The additional foreign currency inflows can improve dollar liquidity in the domestic market and help reduce immediate pressure on the Indian currency.
Analysts expect the rupee to remain relatively stable in the near term, although volatility could continue depending on global oil prices, US dollar movements and foreign investment flows.
Rupee Outlook: ₹95.15–₹95.20 in Near Term
According to market expectations cited in the report, the ₹95.15–₹95.20 per dollar zone could provide a relatively stable range for the rupee in the immediate term.
However, the longer-term outlook remains more challenging.
If global factors turn unfavourable or dollar demand increases, the rupee could face renewed pressure and potentially move towards ₹96.20–₹96.50 per US dollar in the coming weeks.
Several factors will therefore remain important for the currency, including crude oil prices, geopolitical developments, US monetary policy, foreign institutional flows and RBI intervention.
Dollar Index Also Edges Lower
The US dollar also showed a slight decline against a basket of six major global currencies.
The Dollar Index was reported down 0.04% at 99.14.
A weaker dollar index generally provides some relief to emerging-market currencies, including the Indian rupee, although domestic factors continue to play a major role in determining the rupee-dollar exchange rate.
Indian Stock Market Trades Marginally Lower
Meanwhile, Indian equity markets remained slightly weak during early Thursday trading.
The BSE Sensex was down around 45 points at 77,422.70, while the NSE Nifty 50 declined approximately 6 points to 24,202.45.
Despite the cautious movement in domestic equities, foreign investors remained net buyers.
According to the data cited, Foreign Institutional Investors (FIIs) purchased shares worth ₹502.63 crore in the Indian market on Wednesday.
Key Factors Supporting the Rupee
The Indian currency is currently being influenced by several important factors:
| Factor | Impact on Rupee |
|---|---|
| Lower crude oil prices | Positive |
| RBI foreign-exchange measures | Positive |
| $73 billion reported foreign inflows | Positive |
| Slightly weaker Dollar Index | Positive |
| FII buying | Positive |
| Global geopolitical risks | Potentially negative |
| Higher dollar demand | Negative |
| Potential rise in crude prices | Negative |
What Lies Ahead for the Rupee?
The rupee’s recovery to ₹95.40 per US dollar reflects a combination of lower crude prices, foreign currency inflows and supportive RBI measures. However, the currency remains vulnerable to global developments.
In the short term, traders are likely to closely monitor crude oil prices, the Dollar Index, FII flows and developments around the Strait of Hormuz.
While the immediate outlook appears relatively stable, analysts caution that the rupee could come under pressure again if oil prices rise sharply or global demand for the US dollar strengthens.
For now, the ₹95.15–₹95.20 zone remains an important level to watch on the downside, while ₹96.20–₹96.50 could become a potential longer-term pressure zone.
Disclaimer: This article is for informational purposes only and does not constitute investment, currency-trading or financial advice. Exchange rates can change rapidly based on market conditions.
