The Indian rupee appreciated by 13 paise to 95.63 against the US dollar on Thursday, supported by steady foreign capital inflows and domestic stock market gains. However, gains remain limited due to a stronger dollar index following the US Federal Reserve’s decision to hold interest rates steady.
The Indian rupee strengthened to 95.63 against the US dollar in early trade on Thursday, marking a 13-paise gain from its previous close of 95.76. This move follows a period of recovery for the currency, which had previously recorded gains of 74 paise over the preceding two sessions.
Drivers of Currency Movement
Positive sentiment in the domestic equity market is acting as a primary support for the rupee. On Thursday morning, the BSE Sensex rose by 44.77 points to reach 77,699.37, while the NSE Nifty added 21.65 points, trading at 24,270.20. Market activity has been further influenced by foreign institutional investors who remained net buyers, purchasing equities worth Rs 2,981.87 crore in the previous session. When foreign investors buy Indian stocks, they typically exchange foreign currency for rupees, which helps support the local currency's value.
Global Factors Influencing the Dollar
Despite the domestic support, the rupee’s potential for a sharper rise is being countered by global factors. The US dollar index, which measures the strength of the greenback against a basket of six major world currencies, rose by 0.06 per cent to 101.79. This movement is largely linked to the US Federal Reserve’s recent decision to keep interest rates unchanged. When US interest rates remain high, the dollar often becomes more attractive to global investors, which can put pressure on emerging market currencies like the rupee.
Oil Price Volatility and Geopolitical Risk
Investors are also tracking fluctuations in the global energy market, which directly impacts India’s import bill and currency stability. Brent crude oil futures fell by 1.26 per cent to trade at USD 89.60 per barrel. Prices remain sensitive to ongoing geopolitical tensions in West Asia, particularly following recent military actions involving US and Iranian targets. Given that India is a major importer of crude oil, any significant volatility in oil prices often affects the demand for dollars in the local market, as oil companies need to purchase foreign currency to pay for imports. Investors should continue to monitor foreign institutional investment trends and oil price movements, as these remain the two most significant variables impacting the rupee’s performance against the dollar in the near term.