The Indian rupee strengthened by 5 paise in early Friday’s trading and was at 83. Non-oil export growth of 88% against the US dollar. This was mainly on the back of moderating crude oil prices and signs of fresh foreign fund flow after the rupee remained largely range-bound.
Factors that have Favored the Appreciation of the Rupee
Some of the forex traders said that the steep correction happening all across the globe in oil prices currently standing at around USD 77 per barrel has been one of the propellers for the rupee. Since India remains a large importer of oil they help to reduce the trade deficits, meaning they support the rupee.
Closely linked to this, at the IFEU interbank foreign exchange market, the rupee opened at 83. At the start, it was as low as 93 but increased the percentile to 83 in the subsequent year. At 88, it is 5 paise up from the previous close. The rupee settled 3 paise lower at 83 against the US dollar, indicated news reports. 18/93 to the US dollar on Thursday after ranging in a narrow band the previous day.
Some effects of interventions by the personnel of the Central Bank
As the dollar index recently touched a low and was in no sign of strengthening, CR Forex Advisors’ Managing Director Amit Pabari pointed out that the same position was witnessed for the rupee currency of India. This stability has been achieved mostly through purposive interference by the Reserve Bank of India (RBI) which has the vision of managing the USD/INR exchange rate for 83. 90-95 range.
At the same time, an indicator of the dollar’s strength relative to a basket of six major currencies – the dollar index – declined by 0.15% at 101.35 points. Benchmark international oil, namely Brent crude, registered a marginal rise of 0.12%, it traded for $77 were 31 dollars per barrel on futures trade.
Forecast of the Rupee for the Coming One Year
For the near term, the consensus of analysts is that the rupee will be largely range-bound. As per Pabari’s estimate, the upside limit appears to be around 83 for the rupee. Industry average is estimated at 80 with flow support at a range of 84.00.
Domestic Market Volatility
This was evident by the fact that during the morning trade, the domestic equity markets were characterized by lots of volatility. The BSE Sensex opened higher, but the index was later trading 13 points lower 0.2 points, or 0.02%, at 81,039. 99 points. Likewise, the Nifty which began on a higher note fell by 8.25 points, or 0.03%, to trade at the level of 24,803. 25 points.
The Foreign Institutional Investors (FIIs) again bought in net Terms in the capital markets for Thursday’s shares up to ₹1,371. According to exchange data, the total paid-up capital of the company stood at Rs 79 crores.
Of course, this was done while considering the envisaged changes in the inflation rate and other critical anomalies required for formulating new monetary policy and economic outlook.
On the domestic macroeconomic diary, the Reserve Bank of India‘s (RBI) Monetary Policy Committee (MPC) published the minutes of the previous meeting on Thursday. According to the report, the process of disinflation in the past year has been eased by calibrated tightening that began with increasing the policy repo rate by 250 bps since May 2022 and followed by the withdrawal of the accommodative stance.
Speaking at the RBI’s annual conference, Governor Shaktikanta Das underlined the importance of the current policy rate of 6%. 5% is broadly balanced. He also stated that any argument in support of policy relaxation at this stage could be very misleading.
Such a sceptical view on monetary policy along with the fact that the interventions in the forex market are still a daily routine signals that the rupee will remain range-bound shortly.
Conclusion
However, with rupee remained on an erratic account due to its exposure to the continued volatile global economy coupled with moderating oil prices and portfolio management by the central bank, thereby making the rupee one of the focal points of the international market players. The small trading range and the preliminary signs of stabilization suggest that the movement of the rupee will now largely depend on the external environment: the growth of international oil prices, and the dynamics of foreign investment flows.
