Mumbai, May 19—In early trade on Monday, the Indian rupee appreciated by 16 paise to 85.41 against the US dollar, buoyed by a weaker American currency in global markets and robust foreign institutional investor (FII) inflows.
Rupee Trends Higher on Dollar Weakness
At the interbank foreign exchange, the rupee opened at 85.43 against the US dollar before strengthening further to 85.41. It had previously settled at 85.57 on Friday. During the early session, the rupee also touched a low of 85.61.Forex analysts attributed the gains to a subdued US dollar, which slipped amid concerns over the recent downgrade of the US investment-grade rating by Moody’s. The dollar index, which measures the greenback's performance against six major currencies, was down 0.28% at 100.81.
Narrow Trading Range Expected
Despite the appreciation, traders forecast a limited trading range for the rupee. According to Amit Pabari, Managing Director at CR Forex Advisors, "The pair is expected to trade in the 85–85.80 range. If the dollar dips due to concerns from the US credit rating downgrade, the rupee could see some upside. Steady foreign inflows may also help support the currency."Oil Prices and Global Factors in Focus
Brent crude, the global oil benchmark, declined 0.43% to USD 65.13 per barrel amid concerns about oversupply and developments in US-Iran nuclear negotiations. Analysts noted that elevated oil prices pose a challenge for India, which is one of the world’s largest oil importers. Rising crude costs could widen the trade deficit and increase dollar demand, potentially putting further pressure on the rupee.Equity Markets and Foreign Inflows
In domestic equity markets, the BSE Sensex fell 123.76 points to 82,206.83, and the NSE Nifty dropped 29.70 points to 24,990.10 in early trade. Despite the dip in equities, FIIs continued their buying streak, investing a net amount of ₹8,831.05 crore in Indian stocks on Friday, according to exchange data.Forex Reserves Rise Sharply
Providing further support to the rupee, India's forex reserves surged by USD 4.553 billion to USD 690.617 billion in the week ended May 9, driven largely by an increase in gold assets, the Reserve Bank of India reported. This marks a recovery from the previous week's drop of USD 2.065 billion. The reserves are inching closer to the record high of USD 704.885 billion registered at the end of September 2024.Pabari noted, “While this buildup in reserves provides a strong buffer against external shocks and enhances RBI’s ability to intervene in the forex market, its immediate impact may do little to halt the rupee’s ongoing depreciation.”
Overall, the rupee's early gains reflect a combination of supportive global cues, robust FII activity, and strong reserve buffers, though external risks like oil prices and global economic uncertainty may cap further appreciation.
