The Indian rupee appreciated 22 paise to 96.51 against the US dollar in early trade on Friday, aided by a weaker US dollar in global markets, although rising crude oil prices and persistent foreign fund outflows continued to cap gains.
At the interbank foreign exchange market, the domestic currency opened stronger and advanced to 96.51 per US dollar, recovering part of the losses recorded in the previous session. The rebound came as the dollar index eased, offering support to emerging market currencies.
Crude Oil Remains A Key Headwind
Despite the recovery, forex traders said the rupee continues to face pressure from elevated global crude oil prices, driven by escalating tensions in West Asia and renewed concerns over disruptions to energy supplies.
Brent crude has climbed above USD 100 per barrel, raising concerns over India's import bill and inflation outlook. As the world's third-largest crude oil importer, India remains highly sensitive to sustained increases in oil prices.
RBI Intervention Supports The Currency
Market participants said state-owned banks were seen selling US dollars, fuelling expectations that the Reserve Bank of India (RBI) has intervened to prevent the rupee from sliding towards its record low.
Traders believe the central bank is likely to remain active in the foreign exchange market to curb excessive volatility as geopolitical risks continue to weigh on sentiment.
Foreign Outflows Continue To Weigh
Analysts said sustained foreign institutional investor (FII) outflows and weakness in domestic equities remain key challenges for the rupee, even as the softer dollar provides temporary relief.
Going forward, the trajectory of crude oil prices, developments in the Middle East and RBI's intervention strategy are expected to determine the direction of the domestic currency. |
