In the midst of unpredictable trading and fluctuating global circumstances, the Indian rupee demonstrated resilience to close slightly stronger against the US dollar this past Friday. The day witnessed the rupee recoup its earlier losses, ending the session 4 paise ahead at a rate of 83.48 to the dollar, thanks to a spirited comeback in domestic stock markets.
The trading day started on a different note as forex traders observed the rupee slip initially, influenced by a generalized risk aversion that took hold across global markets. This sentiment was largely fueled by escalating geopolitical tensions simmering in the Middle East.
Despite the shaky start, the Indian currency managed to rally. This resurgence was partly attributed to reports that the Reserve Bank of India (RBI) stepped in, taking measures to mitigate an excessively sharp decline of the rupee. The local unit had opened at 83.58 against the greenback on the interbank foreign exchange market and witnessed an intraday high of 83.46 before settling at its final rate for the day.
The sense of relief in the market was palpable as the rupee improved from its previous close, building upon the gains established just a day earlier on Thursday. On that day, the currency had bounced back from its historic low, closing 9 paise higher at 83.52 against the US dollar.
Anuj Choudhary, a Research Analyst at Sharekhan by BNP Paribas, pointed out that market sentiment had been positively impacted by Iran’s clarification that a recent explosion in the region was not a direct attack but a result of their own air defense activities. This clarification helped temper concerns and contributed to a recovery not only in the value of the rupee but also in domestic equities. Additionally, the US dollar experienced a rise on the back of hawkish comments from Federal Reserve officials and the increased demand for safe-haven assets.
However, Choudhary cautioned that the rupee might continue to face pressures due to the ongoing geopolitical uncertainties in the Middle East, potentially maintaining a risk-off mood among investors.
Elsewhere, in the global financial markets, the dollar index, which measures the greenback against a basket of six major currencies, dipped slightly by 0.08% to 106.06. Meanwhile, Brent crude futures, which serve as a global benchmark for oil prices, retreated by 0.31% to stand at $86.84 per barrel.
Choudhary elaborated that the demand for safe havens like the US Dollar, along with the volatility in global crude oil prices, may continue to exert pressure on the Indian rupee. Nonetheless, he also highlighted the possibility of RBI interventions stabilizing the currency at lower levels. Market analysts are projecting the USD/INR spot price to fluctuate within a range of ₹83.30 to ₹83.80.
In the Indian domestic equity market, heavy volatility was observed. The benchmarks initially opened lower but reversed losses to close with decent gains. The BSE Sensex advanced by 599.34 points, or 0.83%, to finish at 73,088.33 points. Similarly, the broader NSE Nifty increased by 151.15 points, or 0.69%, to settle at 22,147.00 points.
In terms of capital market flows, Foreign Institutional Investors (FIIs) were net sellers, unloading shares worth a significant ₹4,260.33 crore as per the data from stock exchanges.
As the financial week drew to a close, the forex and equity markets provided a dynamic landscape. The rupee’s agility in the face of adverse global events to finish stronger against the dollar was a testament to the underlying complex interplay of international and domestic financial forces.
