Indian Rupee Strengthens as Dollar Weakens and Economic Conditions Improve
The Indian rupee opened stronger against the US dollar, trading below the 87 mark, amidst a weakened dollar and improving domestic economic conditions. It has gained over 0.7 percent in March. While crude oil prices also rose, India’s forex reserves showed significant gains. Analysts indicate the rupee may trade within 86.80-87.40, urging attention to market dynamics for potential fluctuations.
On Monday, the Indian rupee opened stronger and traded below the 87 mark against the US dollar, as the American currency continued to weaken amid an improving domestic economy. The rupee opened nine paise stronger at 86.91, following a closure at 87 on Thursday. It has gained over 0.7 percent in March, marking a reversal after five consecutive months of decline.
The dollar index, which measures the value of the US dollar against other foreign currencies, decreased by 0.03 percent. This drop has contributed to a monthly decline of over 3.6 percent, the steepest since November 2022.
Crude oil prices also saw an increase for the second consecutive day, with China announcing measures to enhance consumption. As of 8:55 AM IST, Brent crude rose by 0.58 percent to $70.99 per barrel, while WTI crude increased by 0.64 percent to $67.65 per barrel.
India’s inflation fell to a sharper-than-expected 3.61 percent, coupled with a significant 5 percent rise in industrial production, boosting investor confidence in the rupee. Amit Pabari, managing director at CR Forex Advisors, noted that dovish expectations from the Federal Reserve may keep the dollar under pressure, potentially allowing the rupee to extend its gains. He stated, “However, global risk sentiment and oil price movements will play a crucial role in determining the next leg of the rupee’s trajectory.”
Pabari further indicated that the USD/INR pair is likely to trade within the range of 86.80-87.40 in the near to medium term, with a potential breakout causing additional adjustments of 30-50 paise, highlighting the importance of investor vigilance for upcoming volatility.
India’s forex reserves experienced their most substantial rise in over three years, increasing by $15.37 billion to reach $653.97 billion for the week ending March 7, primarily due to a $10 billion swap by the Reserve Bank of India and the revaluation of other currencies. Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP, noted the rupee’s steady appreciation despite dollar dips being purchased, suggesting the domestic currency may open higher at 86.94, influenced by stronger equities and favorable Asian currency movements.
The Indian rupee has shown resilience in the forex market by opening above the 87 mark against the US dollar, benefitting from the dollar’s continued decline amid positive domestic economic indicators. With inflation rates dropping and industrial production surging, investor confidence is bolstered. The stability of the rupee appears contingent on global economic sentiments and oil prices. It is essential for market participants to remain vigilant as potential volatility looms ahead.
Original Source: www.business-standard.com
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