The Indian rupee appreciated 17 paise to 95.56 against the US dollar in early trade on Thursday, tracking a weak American currency. The movement followed an announcement by the US Treasury that it would double its buyback operations for longer-dated Treasury bonds.
At the interbank foreign exchange, the rupee opened at 95.57 before rising to 95.56, marking an increase of 17 paise from its previous close. On Wednesday, the rupee had remained largely flat, ending just 1 paisa higher at 95.73 against the US dollar.
According to forex traders, the dollar index declined to its lowest level since late May after the US Treasury stated it would increase its longer-term government bond buybacks from $2 billion to $4 billion per operation, beginning September 9. This policy move pushed US long-term yields lower and reduced the dollar's yield advantage. Additionally, the greenback faced downward pressure from reduced expectations of further Federal Reserve tightening, despite recent Fed minutes indicating rising inflation concerns among policymakers.
Commenting on the currency movement, CR Forex Advisors MD Amit Pabari noted that lower long-term yields and fiscal support concerns reduce the appeal of dollar assets. However, he cautioned that elevated global commodity prices continue to pose a challenge.
Brent crude, the global oil benchmark, traded higher by 0.32 per cent at $91.91 per barrel in futures trade. Pabari pointed out that oil trading above $90 keeps pressure on India's import bill, meaning that elevated oil prices act as a major counterweight to the relief provided by a weaker dollar.
Providing an outlook on the exchange rate, Pabari stated that immediate support for the rupee is near 95.30–95.50. As long as this support holds, the USD/INR pair is expected to gradually move towards 96.20–96.50. He added that while the weaker dollar may cause short-term pauses, fragile market sentiment and oil prices mean that dips are likely to be shallow and short-lived rather than marking a genuine trend reversal.
On the domestic market front, equity indices posted strong gains in early trade. The Sensex jumped 504.32 points to reach 77,416.16, while the Nifty traded up 118.85 points at 24,198.55. Exchange data showed that foreign institutional investors purchased equities worth ₹407.99 crore on a net basis on Wednesday.
"Currency fluctuations driven by global macroeconomic policy changes, such as US Treasury buybacks and crude oil price movements, directly impact import costs and operating expenditures for businesses operating in India. While a temporary appreciation of the rupee offers some relief, companies must maintain disciplined financial planning and robust hedging strategies to navigate ongoing commodity price volatility and shifting foreign exchange trends." — Dr. Shishir Gupta, Founder & CEO, StartupLanes
