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The Indian rupee opened flat and showed only a marginal recovery in early trade on Friday, gaining just 3 paise to 84.47 against the US dollar. This minor appreciation came after the rupee touched an all-time low level of 84.50 in the previous session. Despite the support from positive domestic equity trends, the rupee's movement remained constrained, weighed down by ongoing geopolitical tensions and persistent foreign portfolio outflows.
The US dollar strengthened in the international markets, further dampening the rupee's performance. Moreover, Brent crude oil prices continued their upward trajectory, spurred by escalating concerns over the conflict between Ukraine and Russia, which added to the global market volatility. The dollar was also well-supported as foreign institutional investors (FIIs) continued their selling spree in the Indian equity market, which contributed to the increased demand for the greenback.
At the interbank foreign exchange market, the rupee opened at 84.48 and remained in a narrow range, briefly touching 84.47, which represented a modest gain of just 3 paise from the previous day's close. On Thursday, the rupee had depreciated by 8 paise to settle at its lowest-ever level of 84.50 against the US dollar.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that the rupee hit a new low on Thursday after the Reserve Bank of India (RBI) allowed it to fall in line with the strengthening US dollar index, which moved higher to 107.10. US yields remained elevated at 4.42%, further contributing to the rupee's weakness. However, Bhansali pointed out that despite this depreciation, the Indian rupee has performed better than many other Asian currencies in November, supported by the RBI's substantial reserves.
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He further explained that the Real Effective Exchange Rate (REER) for October 2024 had risen to 107.21 from 105.34 in September 2024, indicating that the rupee was slightly overvalued against a basket of 40 currencies. As a result, the RBI is expected to allow the rupee to depreciate gradually over time.
Meanwhile, the dollar index, which tracks the greenback's strength against a basket of six major currencies, was up by 0.06% at 107.03, reinforcing the USD's dominance in the global markets. Brent crude oil futures also saw an increase of 0.23%, rising to USD 74.40 per barrel.
Additionally, the rupee faced further pressure due to domestic factors. CR Forex Advisors MD, Amit Pabari, attributed some of the volatility to the indictment of Adani Group Chairman Gautam Adani and several senior executives in a multi-billion-dollar bribery and fraud case by a US District Court in New York. Allegations of bribery totalling USD 250 million (around Rs 2,100 crore) to secure solar energy contracts have sparked negative sentiment, further impacting the rupee's performance.
On the equity front, domestic markets were performing better, with the Sensex rising 296.48 points or 0.38%, reaching 77,452.27, and the Nifty gaining 95.15 points or 0.41%, reaching 23,445.05 points. However, FIIs were still net sellers in the capital markets, having offloaded shares worth Rs 5,320.68 crore on Thursday, according to exchange data.
(With inputs from PTI)
