Against the dollar on Tuesday, the rupee rose for the third straight session, mainly driven by strong capital inflows even as domestic markets fell, interrupting a sharp gain in the previous two sessions as rising crude oil prices dent investor sentiment .
Reuters last quoted the rupee at 75.25 per dollar, and the PTI reported that in the interbank forex market, the currency opened at 75.54 and hit an intra-day high of 75.27. It eventually closed at 75.29, up 24 paise from the previous close of 75.53.
The rupee was up 0.25 percent on Monday to start the current financial year at a high, supported by a solid rally in domestic equities.
Solid foreign fund inflows and a weaker dollar helped the rupee.
Sriram Iyer, Senior Research Analyst at Reliance Securities, told PTI the rupee appreciated against the US dollar on Tuesday, supported by offshore funds returning to domestic equities.
The dollar index, which measures the dollar’s strength against a basket of six currencies, was trading 0.09% lower at 98.90.
“Continued risk on sentiments, weak dollar index and stronger regional (Asian) currencies are supporting the local unit (rupee) in the move north,” Dilip Parmar, research analyst at HDFC Securities, told PTI.
“On the global front, investors are assessing measures taken against the economic growth prospects of Russia and China as Shanghai remained in lockdown. The focus in the near term remains the monetary policy decision and stance of the RBI,” added Mr Parmar ready.
That comes after the currency closed fiscal year 2021-22 with a loss of nearly 4 percent, following the general rise in crude oil prices due to the ongoing war between Russia and Ukraine.
But in recent sessions, the rupee’s appeal has helped foreign institutional investors turn in favor of Indian capital markets.
Indeed, the latest stock market data revealed that FIIs remained net buyers in the capital market on Tuesday as they bought shares worth Rs 374.89 crore.
That came on a day when the 30-share BSE Sensex fell 435 points, or 0.72 percent, to close at 60,177, while the broader NSE Nifty slid 96 points, or 0.53 percent, to settle at 17,957.
Domestic indices were up nearly 3.5 percent each in the past two sessions.
According to Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd, a PTI report showed the rupee has risen about 0.90 percent this week.
“However, the rupee is unlikely to hold on to recent gains going forward as concerns over new sanctions against Russia by western countries have led to a sharp drop in crude oil prices, accentuating the tight global supply scenario,” he said. Mrs Sachdeva. said.
The geopolitical crisis dominates sentiment and is likely to weigh on the domestic currency. Expectations of rapid rate hikes by the US Fed to curb decades-long high inflation are also keeping the dollar index afloat, a major headwind for the Indian rupee, she noted.
Markets are now focused on the minutes of the latest US Fed meeting and the RBI MPC outcome, both scheduled for this week, for further clues about the monetary policy stance of the respective central banks.
“We believe that the rupee is likely to witness renewed selling pressure in the coming days, with the 75.20 mark posing a strong hurdle to the rupee-dollar exchange rate,” added Ms Sachdeva.
Asian and emerging markets were stronger and supportive, while markets also shrugged off high crude oil prices.
“Export sales and clunky companies have been the main drivers of the rupee’s appreciation. With oil prices stable, the rupee is seeing an influx of FPIs,” said Anindya Banerjee, vice president for currency and interest rate derivatives at Kotak Securities.
Mr. Banerjee further commented that “we could see volatility pick up in the second half of this week. We expect a near-term range of 75.00 and 75.80 on the spot.”