The Indian rupee strengthened by 24 paise to 93.74 against the US dollar in early trade on Monday, November 9, extending its recovery for the second consecutive trading session. The domestic currency received support from falling international crude oil prices, foreign investment inflows and growing expectations of an easing of geopolitical tensions in the Middle East.
At the interbank foreign exchange market, the rupee opened at 93.85 against the dollar before gaining further ground to trade at 93.74. The currency had settled at 93.98 on Friday, appreciating 43 paise during the previous trading session.
The latest recovery comes after a period of considerable pressure on the Indian currency, driven by elevated crude oil prices, uncertainty in global financial markets and geopolitical developments. Market participants believe that improving international conditions could provide some support to the rupee, although its movement will continue to depend on oil prices, foreign fund flows and the strength of the US dollar.
A major factor supporting the domestic currency has been the recent decline in crude oil prices. Brent crude, the global oil benchmark, which had surged to around $117.64 per barrel, has subsequently fallen below the $100 mark. During Monday’s early trade, Brent crude futures were trading 0.15% lower at $98.17 per barrel.
The moderation in oil prices is particularly important for India, which depends heavily on imports to meet its crude oil requirements. Higher international oil prices increase the country’s import expenditure and demand for US dollars, putting additional pressure on the rupee. Conversely, a decline in crude prices can help reduce the import bill and ease pressure on the domestic currency.
The latest fall in oil prices comes amid expectations that tensions between the United States and Iran could ease through diplomatic discussions. US President Donald Trump indicated over the weekend that further military strikes against Iran were unlikely if negotiations progressed towards a meaningful agreement.
The possibility of reduced tensions in the Middle East has improved sentiment in global markets, particularly in the energy sector. Any progress towards diplomatic engagement could reduce concerns over disruptions to oil supplies and help moderate energy prices.
Commenting on the currency movement, Amit Pabari, managing director of CR Forex Advisors, said improving diplomatic expectations were influencing crude oil prices and currency markets. The possibility of a lasting agreement in the region could help reduce geopolitical uncertainty and provide further support to the rupee.
Foreign investment inflows have also contributed to the domestic currency’s recovery. Foreign institutional investors (FIIs) purchased Indian equities worth ₹13,749.82 crore on Friday, according to exchange data. Strong foreign investment activity generally supports the rupee by increasing the availability of dollars in the domestic financial market.
The dollar index, which measures the US currency against a basket of six major international currencies, was trading 0.12% lower at 102.18. A weaker dollar typically provides some relief to emerging market currencies, including the Indian rupee, by improving their relative strength in international exchange markets.
According to market participants, the rupee’s movement below the 94-per-dollar mark has improved the outlook for the domestic currency in the near term. Pabari indicated that the rupee could move towards 93.50 and 93.00 against the US dollar if the favourable conditions continue. However, the 94.40-94.50 range could act as an immediate resistance zone.
For the Indian economy, a stronger rupee and softer crude oil prices could offer some relief by reducing the cost of imports and easing inflationary pressures. However, the currency’s ability to sustain its gains will depend on whether favourable global developments continue and foreign investors maintain their interest in Indian financial markets.
Market participants will closely monitor crude oil prices, foreign institutional investor activity, movements in the dollar index and developments in the Middle East for further direction on the rupee.
Despite the recent gains, currency traders remain cautious about the sustainability of the recovery. Any fresh escalation in geopolitical tensions, an increase in crude oil prices or a reversal in foreign investment flows could put renewed pressure on the rupee. Developments in the US dollar and global interest rate expectations will also remain important factors influencing the USD-INR exchange rate.
Meanwhile, India’s foreign exchange reserves declined by $2.691 billion to $717.056 billion during the week ended October 30, according to the Reserve Bank of India (RBI). The country’s foreign exchange reserves provide a financial buffer against external shocks and help maintain stability in the currency market.
