Mumbai, May 16 – The Indian rupee rose marginally by one paisa to settle at 85.53 against the US dollar on Friday, buoyed by strong foreign institutional investor (FII) inflows and a slight decline in the dollar index. However, gains were capped due to rising Brent crude prices, negative domestic equity trends, and widening trade deficit data.
On Thursday, the rupee had declined by 22 paise.
Forex expert Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, "Despite gains in Asian and European currencies, the rupee remained under pressure near the 85.30 level. It will likely continue trading in the broader range of 85-86, with a narrower range of 85.25-85.75 expected on Monday."
Meanwhile, domestic equity markets ended lower. The Sensex declined by 200.15 points to 82,330.59, while the Nifty fell 42.30 points to settle at 25,019.80.
Adding to the rupee's challenges, recent government data showed India's merchandise trade deficit widened to a five-month high of USD 26.42 billion in April. Imports surged 19.12 percent year-on-year to USD 64.91 billion, largely due to increased crude oil and fertiliser shipments. Exports also rose by 9.03 percent to USD 38.49 billion, marking the highest level in six months, driven by electronics and engineering goods.
"The trade data indicated an increase in exports by about 9 per cent while imports increased 19.13 per cent, taking the trade deficit higher to USD 26.42 billion... As seen in the last few months/years, the service exports saved the day for India," added Bhansali.
The dollar index, which measures the greenback’s strength against six major currencies, was down 0.12 per cent at 100.75, offering some relief to the rupee and other emerging market currencies.
Rupee Movement and Market Range
At the interbank foreign exchange market, the rupee opened strong at 85.28 and fluctuated within a narrow band of 85.28 to 85.70 during the session. It finally settled at 85.53 (provisional), marginally higher than its previous close of 85.54.On Thursday, the rupee had declined by 22 paise.
Forex expert Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, "Despite gains in Asian and European currencies, the rupee remained under pressure near the 85.30 level. It will likely continue trading in the broader range of 85-86, with a narrower range of 85.25-85.75 expected on Monday."
Weighing Factors: Crude, Equities, and Trade Deficit
The rupee's upward movement was limited due to external and domestic pressures. Brent crude prices increased by 0.14 per cent to USD 64.62 per barrel in futures trade, raising concerns over the import bill.Meanwhile, domestic equity markets ended lower. The Sensex declined by 200.15 points to 82,330.59, while the Nifty fell 42.30 points to settle at 25,019.80.
Adding to the rupee's challenges, recent government data showed India's merchandise trade deficit widened to a five-month high of USD 26.42 billion in April. Imports surged 19.12 percent year-on-year to USD 64.91 billion, largely due to increased crude oil and fertiliser shipments. Exports also rose by 9.03 percent to USD 38.49 billion, marking the highest level in six months, driven by electronics and engineering goods.
"The trade data indicated an increase in exports by about 9 per cent while imports increased 19.13 per cent, taking the trade deficit higher to USD 26.42 billion... As seen in the last few months/years, the service exports saved the day for India," added Bhansali.
FII Support and Dollar Index Impact
FIIs continued their buying streak in the Indian equity markets, purchasing shares worth Rs 5,392.94 crore net on Thursday, which helped support the rupee.The dollar index, which measures the greenback’s strength against six major currencies, was down 0.12 per cent at 100.75, offering some relief to the rupee and other emerging market currencies.
