The Indian rupee rose by 12 paise to 96.24 per dollar, supported by strong foreign exchange inflows. Since June, the Reserve Bank of India’s swap facility has attracted $20.72 billion, helping stabilize liquidity despite broader market volatility and rising crude oil prices.
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The Indian rupee staged a recovery in the interbank foreign exchange market on Tuesday, closing 12 paise higher at 96.24 against the US dollar. The currency opened at 96.41 and fluctuated between 96.13 and 96.42 during the trading session, marking a reversal from the previous day's decline of 6 paise.
This recovery was supported by a notable increase in capital inflows linked to specific liquidity measures by the Reserve Bank of India (RBI). Since the launch of a swap facility on June 8, the country has seen total foreign exchange inflows of $20.72 billion. These inflows have provided a cushion for the domestic currency, which has faced pressure from global economic uncertainties and shifting sentiment in domestic equity markets.
Foreign Currency Non-Resident (FCNR) deposits have been a major driver, contributing $17.406 billion to the total inflow as of July 17. Additionally, the facility has attracted $1.97 billion through Overseas Foreign Currency Borrowings (OFCBs) and $1.342 billion via External Commercial Borrowings (ECBs). These capital flows are essential for strengthening the nation's balance of payments and providing the RBI with greater flexibility in managing currency volatility.
While the inflows have offered support, the broader market environment remains challenging. On the domestic equity front, the Sensex dropped 238.41 points to finish at 77,470.11, while the Nifty slipped 50.80 points to 24,187.70. Exchange data indicates that Foreign Institutional Investors (FIIs) were net sellers of Indian equities, offloading shares worth Rs 1,121.04 crore on Monday.
External factors continue to influence currency movements. The dollar index experienced a marginal dip of 0.03 per cent, settling at 100.91. However, energy costs remain a key concern for the rupee, as Brent crude futures traded 0.25 per cent higher at $89.44 per barrel. Ongoing geopolitical tensions in the Middle East, specifically the conflict involving the US and Iran alongside disruptions from the Houthi blockade, represent persistent risks to oil supply chains. Increased oil prices typically lead to higher import costs for India, which can exert downward pressure on the rupee.
Looking ahead, investors and market participants will likely monitor the sustainability of these forex inflows and how the RBI balances liquidity management against inflationary pressures caused by energy price volatility. The movement of global oil prices and the consistency of FII activity in Indian equities remain the primary factors to track for future currency trends.