Mumbai: The Indian rupee strengthened by 14 paise to 94.61 against the US dollar in early trade on Wednesday, supported by a decline in crude oil prices, a weaker greenback and sustained foreign portfolio inflows into domestic equities.
Positive stock market sentiment also supported the currency, with benchmark indices extending their winning streak to a fifth consecutive session. However, investors remained cautious ahead of the outcome of the US midterm elections.
In the interbank foreign exchange market, the rupee opened at 94.61 against the dollar and strengthened to 94.50 before giving up some gains to trade at 94.61. The currency had settled at 94.75 on Tuesday, gaining 9 paise against the US dollar.
Weaker dollar and lower crude prices support rupee
The US dollar came under pressure amid declining Treasury yields and uncertainty surrounding the US midterm election results.
The dollar index, which measures the greenback against a basket of six major currencies, fell 0.54 per cent to 101.17.
Brent crude futures also declined 0.49 per cent to USD 103.09 per barrel. The fall offered some relief to India, which relies heavily on imported crude oil.
Lower oil prices can reduce the country's import bill and ease demand for dollars from oil marketing companies, helping support the rupee. However, elevated energy prices and geopolitical uncertainties continue to pose risks.
Foreign investors continue equity buying
Foreign portfolio investment provided another source of support for the domestic currency.
Foreign institutional investors (FIIs) remained net buyers for the third consecutive session on Tuesday, purchasing equities worth Rs 6,836.81 crore, according to provisional exchange data.
Continued buying indicates improving foreign investor interest in Indian equities, with valuations in select large-cap stocks and corporate earnings among the factors supporting sentiment.
Sensex rises over 435 points
Domestic equity markets opened higher on Wednesday, adding to the positive mood in the currency market.
The 30-share BSE Sensex rose 435.10 points, or 0.57 per cent, to 77,352.95 in early trade. The NSE Nifty gained 115.90 points, or 0.49 per cent, to reach 23,925.10.
Both benchmark indices had advanced more than 1.5 per cent in the previous session.
US election outcome and oil prices in focus
Currency market participants are keeping a close watch on the US midterm election results, movements in Treasury yields and changes in global crude oil prices.
The recent gains have given the rupee some near-term support, but its movement will also depend on whether foreign investment inflows continue and how global energy markets evolve.
