The Indian rupee demonstrated resilience against the US dollar, showing growth for the second consecutive day. New measures by the Reserve Bank of India (RBI) had a positive impact, allowing the rupee to strengthen by 44 points at the start of trading and reach the level of 94.92 per dollar. The previous trading session was also marked by a rise in the rupee.
Market attention is now focused on whether the rupee can hold below the 95 mark or if demand pressure for the dollar and global factors will halt its upward trend.
In the interbank foreign exchange market in Mumbai on October 14, the rupee opened at 95.05 per dollar, after which it continued to strengthen to 94.92. This increase amounted to 44 points compared to the previous close. On Tuesday, the rupee also rose by 42 points, closing at 95.36 per dollar. Currency traders note that recent measures taken by the RBI to stabilize the rupee have provided support to the currency market. The goal of these measures is to reduce immediate demand for the dollar and limit speculative positions against the rupee.
To reduce pressure on the rupee, the RBI has taken a number of actions. Among them are a special agreement to exclude the needs of oil refining companies for dollars from the spot market and tightening rules for trading derivative financial instruments in foreign currency. The central bank also instructed banks to hold 20% of reserves when purchasing more than 20 million dollars. These steps are aimed at limiting dollar demand and speculation in the market. Nevertheless, the further movement of the rupee will depend on dollar demand and global market sentiment.
According to currency traders, if the rupee remains below the 95 level per dollar, its growth may continue, and the next important milestone could be the 94.50 level. However, these are only market forecasts, not established targets. Finance Minister Nirmala Sitharaman stated on Tuesday that the rupee has significantly weakened over the last year and a half. She also emphasized that external challenges play a large role in the volatility of the rupee. The RBI is focusing on preventing excessive fluctuations in the rupee, while the government is concentrating on strengthening the fundamentals of the domestic economy.
The dollar index fell by 0.06% on Wednesday to 102.11. This index measures the strength of the dollar against six major currencies. On the other hand, Brent Crude futures rose by 0.57%, reaching $106.29 per barrel. The rise in crude oil prices is important for India, as the country imports a significant portion of its needs. The increase in oil prices may require more dollars for imports, creating a risk of pressure on the rupee. Therefore, despite RBI measures, monitoring global market dynamics is necessary.
Despite the rupee's strengthening, the domestic stock market showed weakness. At the start of trading, the Sensex index fell by 32.96 points to 73,000.82, and the Nifty declined by 32.65 points to 22,688.75. According to exchange data, Foreign Institutional Investors (FIIs) made a net sale of 1.30513 crore rupees in the Indian stock market on Tuesday. Thus, currently, there is no single direction of movement between the strengthening of the rupee and the dynamics of the stock market. For the rupee, the 95 per dollar level is currently considered important. Although recent RBI steps have given the rupee initial support, sustained growth requires support from market conditions. The next trading sessions will show how long this recovery of the rupee will last.