Mumbai: The Indian rupee strengthened by 24 paise to 93.74 against the US dollar in early trade on Monday, supported by declining crude oil prices, strong foreign portfolio investment inflows and improving sentiment over the possibility of a diplomatic resolution to the Middle East conflict.
At the interbank foreign exchange market, the rupee opened at 93.85 against the dollar before gaining further to 93.74. The currency had closed at 93.98 on Friday, after rising 43 paise during the session.
Forex traders said easing geopolitical concerns and a reduction in the risk premium on crude oil had improved sentiment towards the rupee.
Middle East Developments Ease Crude Oil Concerns
Expectations of progress in diplomatic efforts involving the United States and Iran have helped ease concerns over potential disruptions to global energy supplies.
US President Donald Trump indicated over the weekend that further military strikes against Iran were highly unlikely if negotiations moved towards a substantive agreement.
The developments have weighed on crude oil prices. Brent crude, the global oil benchmark, declined 0.15% to USD 98.17 per barrel in futures trade.
Amit Pabari, Managing Director of CR Forex Advisors, said improved diplomatic expectations were already influencing energy prices. He noted that Brent crude had fallen from around USD 117.64 to below USD 100 per barrel.
Lower oil prices are significant for India, which relies heavily on imported crude. A sustained decline can help reduce the country's import bill and limit demand for dollars.
Foreign Investor Inflows Support Rupee
Foreign portfolio investment provided additional support to the domestic currency. According to exchange data, foreign institutional investors (FIIs) purchased equities worth Rs 13,749.82 crore on Friday.
The US dollar also weakened against major global currencies. The dollar index, which measures the greenback against a basket of six major currencies, declined 0.12% to 102.18.
Domestic equity markets, however, opened marginally lower on Monday. The BSE Sensex fell 93.95 points to 80,919.19, while the NSE Nifty declined 30 points to 24,968.80.
Rupee May Test 93.50 and 93.00 Levels
Currency market participants see scope for further appreciation if crude prices remain subdued and geopolitical conditions continue to improve.
Pabari said that with the USD/INR exchange rate moving below the 94 mark, the rupee could strengthen towards 93.50 and 93.00. He identified the 94.40–94.50 range as an immediate resistance zone.
Meanwhile, India's foreign exchange reserves declined by USD 2.691 billion to USD 717.056 billion in the week ended 30 October, according to data released by the Reserve Bank of India (RBI).
