The Indian rupee gained 5 paise to end at 82.86 (provisional) against the US dollar on Wednesday. This increase was supported by the weakening of the US dollar against other major currencies internationally.
However, the positive momentum in the rupee was limited by foreign capital outflows and rising crude oil prices in the global markets, according to forex analysts. Investors were cautious due to upcoming events such as the US inflation data and the Reserve Bank of India’s (RBI) monetary policy decision, set to be released on Thursday. The RBI’s rate-setting panel, the Monetary Policy Committee (MPC), began its three-day review meeting on Tuesday.
Starting the day at 82.83, the rupee showed strength throughout the day and eventually settled at 82.86 (provisional) against the US dollar. This marked a gain of 5 paise compared to its previous closing rate. The rupee reached a high of 82.80 and a low of 82.86 against the dollar during the trading session.
In the previous session, the rupee had closed at 82.91 against the dollar, marking its lowest level in over 8 months.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, explained that the Indian rupee saw a slight positive trend on Wednesday due to the US dollar weakening slightly. However, the increase in crude oil prices and a sluggish domestic market limited the rupee’s gains. He noted that the US dollar had strengthened on Tuesday after credit ratings of several small to mid-sized US banks were downgraded by Moody’s, prompting a safe-haven appeal for the dollar. Choudhary also mentioned that China’s Consumer Price Index (CPI) experienced its first year-on-year decline since February 2021, contributing to the dollar’s strength.
Choudhary predicted that the rupee might face downward pressure due to risk aversion in global markets and selling pressure from Foreign Institutional Investors (FIIs). Nevertheless, a weaker US dollar could provide some support to the rupee at lower levels.
In anticipation of the RBI’s monetary policy decision, traders were likely to adjust their positions. The expectation was for the RBI to maintain the status quo and keep the repo rate unchanged at 6.5%. Choudhary added that the USD/INR spot exchange rate was likely to trade in the range of 82.40 to 83.30 in the near future.
On the global front, the dollar index, which measures the dollar’s strength against a basket of six major currencies, decreased by 0.11% to 102.42.
The price of Brent crude, a global oil benchmark, rose by 0.75% to reach USD 86.82 per barrel.
In the domestic stock market, the 30-share BSE Sensex ended 149.31 points or 0.23% higher at 65,995.81. The broader NSE Nifty also advanced, closing up by 61.70 points or 0.32% at 19,632.55.
Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, having sold shares worth Rs 711.34 crore, according to exchange data.