The Indian rupee strengthened by 24 paise to 93.74 against the US dollar in early trade on Monday, supported by lower crude oil prices, strong foreign institutional inflows and hopes of easing tensions in the Middle East.
Mumbai, November 9 — The Indian rupee strengthened for the second consecutive session on Monday, appreciating 24 paise to 93.74 against the US dollar as falling crude oil prices and improving foreign fund flows supported the domestic currency.
At the interbank foreign exchange market, the rupee opened at around 93.85 against the dollar before strengthening further to 93.74.
The currency had already registered a sharp recovery on Friday, gaining 43 paise to close at 93.98 against the US dollar.
Crude oil falls below $100
One of the biggest factors supporting the rupee was the decline in global crude oil prices.
Brent crude, which had earlier climbed to around $117.64 per barrel, slipped below the $100 mark and was trading at around $98.17 per barrel in futures trade.
India imports a large proportion of its crude oil requirements, meaning lower global oil prices can reduce demand for dollars from domestic importers and ease pressure on the rupee.
Hopes of de-escalation in the Middle East also supported sentiment. Any reduction in geopolitical tensions could further lower the risk premium built into crude oil prices.
FIIs buy ₹13,750 crore of Indian equities
Strong foreign institutional investment also provided support to the domestic currency.
Foreign institutional investors were net buyers of Indian equities worth ₹13,749.82 crore on Friday, according to exchange data.
Meanwhile, the US dollar index, which measures the greenback against a basket of six major currencies, declined 0.12% to 102.18.
The combination of a weaker dollar, lower crude oil prices and stronger foreign investment flows helped the rupee move below the important 94-per-dollar level.
Can rupee strengthen further?
CR Forex Advisors Managing Director Amit Pabari said the break below 94 has increased the possibility of the rupee appreciating towards 93.50 and potentially 93.00.
On the other hand, the 94.40–94.50 range could act as an immediate resistance zone for the currency.
Domestic equities, however, opened slightly lower. The Sensex declined 93.95 points to 80,919.19, while the Nifty slipped 30 points to 24,968.80 in early trading.
Meanwhile, India’s foreign exchange reserves declined $2.691 billion to $717.056 billion during the week ended October 30.
The rupee’s near-term direction is likely to remain sensitive to crude oil prices, foreign investment flows, movements in the US dollar and developments in the Middle East.
