Rupee achieves best weekly performance in over 2 years
What's the story
The Indian rupee (INR) settled at 86 against the US dollar today, recording a notable weekly gain of 36p. This is the rupee's biggest weekly gain since January 2023.
Contributing to this upward momentum are strong foreign inflows and a rally in domestic equities.
In the last six sessions, the rupee has appreciated by 123p, reflecting strong market performance.
Investment impact
Foreign investments bolster rupee's rally
Foreign institutional investors (FIIs) have played a key role in the rupee's recent rally. On Thursday alone, FIIs pumped ₹3,239 crore into equities, greatly boosting the currency's strength.
However, despite this positive trend, experts warn that surging crude oil prices could restrict further gains.
Anuj Choudhary of Mirae Asset Sharekhan predicts the rupee will trade in a range of 85.80-86.25 in the near-term due to this.
Market forecast
Rupee's strength could attract participation in RBI's upcoming auction
The rupee's recent strength and falling hedging costs may prompt participation in the Reserve Bank of India (RBI)'s upcoming $10 billion forex swap auction.
The swap is likely to infuse liquidity into the banking system, aiding corporates managing dollar exposures.
Hedging costs have fallen to ₹6-6.20 from ₹6.70-6.90 last month, making it an attractive opportunity for corporates according to B. Prasanna from ICICI Bank.
Market analysis
Global market trends and their impact on rupee
The US dollar index gained 0.19% to 104.04 points while Brent crude oil prices dipped 0.29% to $71.79 per barrel.
Domestic equities also saw a major spike with the Sensex gaining 557 points to settle at 76,905 and the Nifty rising 160 points to settle at 23,350.
The rupee is likely to continue its weekly uptrend due to inflows from foreign banks.