Rupee rises 7 paise to close at 93.70 against US dollar amid FPI inflows

The Indian rupee recovered slightly on Wednesday, gaining 7 paise to settle provisionally at 93.70 against the US dollar. Market participants noted that the currency's movement was driven by domestic market strength, foreign capital inflows, and easing global crude oil prices.

At the interbank foreign exchange market, the local unit opened at 93.71 against the dollar. During the trading session, the currency recorded a high of 93.63 and a low of 93.88. Domestic equity, currency, and debt markets had remained closed on Tuesday on account of 'Diwali Balipratipada'. On Monday, the rupee had appreciated by 21 paise to close at 93.77.

Foreign institutional investors (FIIs) remained active in the market, purchasing equities worth ₹7,212.22 crore on Monday. Data from depositories show that foreign investors turned net buyers of Indian equities in November, infusing ₹53,739 crore during the first nine days of the month. This follows consecutive months of outflows, which saw net withdrawals of ₹34,843 crore in October and ₹35,861 crore in September.

Despite the domestic tailwinds, gains for the rupee were restricted by a strengthening US dollar and a surge in US Treasury yields. The dollar strengthened following hotter-than-expected US consumer price index (CPI) inflation data, which increased the likelihood of a Federal Reserve rate hike in December. The dollar index, tracking the greenback against a basket of six major currencies, stood at 102.50, up by 0.27 per cent.

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, noted that the rupee is expected to trade with a positive bias supported by domestic market strength and foreign inflows. However, he cautioned that strength in the greenback and higher US Treasury yields amid strong inflation and jobs data would likely cap sharp upside movements. Spot USD/INR is projected to trade within a range of 93.40 to 93.95.

In global commodities, Brent crude futures traded 1.01 per cent higher at $92.41 per barrel. Meanwhile, US financial markets remained closed on Wednesday on account of the Veterans Day holiday.

"The recent return of foreign portfolio inflows into Indian equities is a positive indicator for overall market liquidity and investor confidence. However, currency valuations continue to face external pressures from global macroeconomic factors, particularly US inflation trends and Federal Reserve rate expectations. Businesses and financial planners must factor in this currency volatility when managing cross-border transactions and capital allocation." — Dr. Shishir Gupta, Founder & CEO, StartupLanes