Financial markets witnessed the Indian rupee inching up against the U.S. dollar early on Friday, as it rode a wave of positive sentiment arising from robust activity in the domestic equities and a broader softening of the American currency on the global stage. As trading commenced, forex traders carefully weighed the implications of overseas capital flow and the persistent high prices of crude oil, which cast a shadow over the otherwise strengthening rupee.
The day’s trading set off with the rupee presenting a formidable opening at 83.40 at the interbank foreign exchange, rising to an intra-day summit of 83.36 against the U.S. dollar. During the morning exchange, the rupee was observed making headway, trading at 83.37 dollars, an uplift of 9 paise from its closing figure the previous day, where it had ended 3 paise down at 83.46 against the dollar.
Gaurang Somaiya, a respected analyst in Forex and bullion for Motilal Oswal Financial Services Ltd., highlighted that the dollar was under pressure against a basket of major currencies, following the U.S. Federal Reserve’s consistent stance of maintaining interest rates unchanged for a sixth consecutive session. The Fed’s decision has been perceived as a sign of stalled progress in achieving the central bank’s 2% inflation target for the current year, further impacted by the ongoing strains within the workforce market.
The much-anticipated release of the U.S. non-farm payroll data also became a focal point for market participants, as its expected marginal lower figure could apply additional pressure on the dollar’s performance. Furthermore, the movements in the weekly unemployment claims, trade balance, and factory order data emanating from the U.S. are poised to deliver significant cues to market dynamics.
Somaiya conveyed his projection on the day’s currency fluctuations, emphasizing that “Today, the focus will be on the non-farm payrolls data, which is expected to come in marginally lower and that could weigh on the greenback. Apart from payrolls, services PMI number is also likely to trigger volatility for the dollar. We expect USD-INR (Spot) to trade sideways and quote in a range of 83.20-83.50.”
In the manufacturing sector, India’s PMI took a slight dip to 58.8 in April 2024 from 59.1 in the prior month. Despite this marginal decline, the seasonally adjusted HSBC India Manufacturing Purchasing Managers’ Index (PMI) underscored the second-fastest improvement in business conditions seen in over three and a half years, sustained by strong consumer demand.
Concurrently, the dollar index, a measure of the dollar’s strength against six other leading currencies, experienced a slight decrease by 0.04% landing at 105.13. This contrasted with Brent crude futures, which witnessed a rise of 0.36% to $83.97 per barrel, presenting a headwind for the oil-importing nations such as India.
On the equity front, signs of buoyancy were prevalent as the benchmark BSE Sensex rose by 463.87 points, or 0.62%, to 75,074.98, while the broader NSE Nifty soared by 136.65 points, or 0.60%, to 22,784.85, reflecting overall optimistic market sentiment.
A significant development predominating over the capital market landscape was the net selling by foreign institutional investors (FIIs) on Thursday. They offloaded shares worth ₹964.47 crore on a net basis, according to the compiled exchange data, indicating a potential area of concern for the country’s financial markets.
As this volatile day progresses, the rupee’s journey continues to be a critical story unfolding within the intersection of currency values, foreign exchange market operations, and the overarching canvas of global financial markets.
