The Indian rupee strengthened for the fourth consecutive session, settling at 95.05 against the US dollar, supported by falling crude oil prices and a weaker greenback. This week, the currency has recovered 2%, even as domestic stock markets rose while regional Asian markets faced pressure. Investors are now watching the trade deficit and central bank liquidity measures.
The Indian rupee finished at 95.05 against the US dollar on Thursday, marking four days of straight gains. This shift comes after the currency touched record lows last week, helping the rupee recover roughly 2% this week alone. The recovery reflects a cooling US dollar index, which has retreated from its recent 18-month high as Treasury yields declined.
Energy costs have also played a major role in the currency's recent strength. Brent crude oil prices drifted lower following reports that the US might ease restrictions on Russian shipping fleets. Since India is a major energy importer, lower oil prices are generally seen as a positive for the rupee, as they can reduce the pressure on the country's import bill and foreign exchange outflows.
Domestic markets showed resilience, with Indian stocks gaining approximately 2% on Thursday. This performance stood in contrast to some other major Asian markets, such as Japan and South Korea, which faced declines. Global investor sentiment in those regions has been cautious due to concerns regarding high debt levels in companies focused on the Artificial Intelligence sector.
Reserve Bank Intervention and Trade Data
The Reserve Bank of India continues to be a key participant in the market. Analysts noted that the central bank is using its foreign exchange reserves to manage volatility and defend the currency. This activity is visible in the forward premiums, which have reached multi-year highs, signaling tighter liquidity conditions as the bank manages the supply of money in the system.
On the data front, India's merchandise trade deficit for September was reported at $30.21 billion. While this remains a significant figure, it aligned with what most economists had expected. The fact that the news did not surprise the market helped keep the positive momentum in the currency alive.
Looking ahead, investors are likely to monitor the country's trade balance and how the central bank adjusts its liquidity measures. While the drop in oil prices and the weaker dollar have provided relief, the long-term direction of the rupee will depend on how effectively the country manages its import costs and keeps the trade deficit stable against global economic shifts.