The strengthening of the Indian rupee against the US dollar continued for the eighth trading session. On October 21, the rupee rose by 29 points at the start of trading, reaching the level of 94.62 per dollar. This growth was driven by the inflow of foreign dollars related to the Jio Platforms IPO, as well as measures taken by the Reserve Bank of India (RBI). Nevertheless, the rupee's rise was limited by high crude oil prices and a strong US dollar.
In the interbank currency market, the rupee opened on Wednesday at 94.78 per dollar, subsequently strengthened, and reached 94.62 per dollar. Previously, on Monday, the rupee closed at 94.91 per dollar. The currency market was closed on Tuesday due to the Dashera holiday.
The main reason for the rupee's strengthening was the inflow of dollars from foreign investors associated with the Jio Platforms IPO. This IPO was open to public investment on Wednesday. Analysts note that during the share distribution process, foreign investors are using a strategy of selling dollars to acquire rupees. This increased the inflow of dollars into the domestic currency market and supported the rupee.
According to Amir Macda, a commodities and currency market analyst at Choice Broking, in addition to the inflow of foreign dollars from the Jio IPO, RBI measures also contributed to the rupee's strengthening. He explained that during the IPO distribution, foreign investors actively used the Sell/Buy Swap mechanism. In this process, investors sell dollars in the spot market, receiving rupees, and then enter into an agreement to buy back dollars after a certain period, which is usually less than a week.
The rupee also received support due to intervention by the Reserve Bank of India. The RBI can control significant fluctuations in the rupee by buying or selling dollars in the currency market according to needs. RBI support was cited as one of the reasons for the rupee's strengthening on Wednesday, as it helped limit the demand for the dollar. However, despite the rupee's rise, pressure on the currency market has not completely disappeared. High crude oil prices remain a problem for India, as the country imports a significant portion of its needs. Rising oil prices may force importers to spend more rupees to purchase dollars, which will increase pressure on the rupee.
On Wednesday, the US dollar index traded with a slight increase of 0.06%, reaching the level of 101.58. This index reflects the strength of the US dollar compared to six major foreign currencies. At the same time, on the international market, Brent crude oil futures rose by 1.42%, reaching $110.33 per barrel. The rise in oil prices poses a challenge to the rupee. It is worth noting that on Tuesday, the US dollar index fell by approximately 0.2% and reached a three-week low, which was linked to the decreased attractiveness of the dollar due to US Treasury bond yields and falling oil prices.
According to Amir Macda from Choice Broking, during Wednesday's trading, the rupee may remain in the range of 94.00 to 94.75 against the US dollar. However, the market direction will depend on the inflow of dollars related to foreign investments, RBI actions, and crude oil prices. Finerex also offered various strategies for importers and exporters. According to their forecast, the level of 94.73 per dollar could be a good opportunity for importers to purchase dollars in the near future. Exporters, meanwhile, are advised to wait for the 94.95 level to sell dollars or hedge. Finerex advised importers to buy according to October's needs to avoid high premiums, emphasizing that the decision to actually buy or sell should be made considering business needs, bank rates, and risks.