Rupee Climbs to 93.70 Against Dollar on Foreign Fund Returns and Cheaper Oil

A firmer start for the currency

The Indian rupee opened Wednesday on a firmer footing, rising seven paise to around 93.70 against the U.S. dollar in the interbank market. The move reversed part of the pressure seen earlier in the week and was linked to a combination of renewed inflows into domestic stocks and softer prices for imported crude.

The currency’s gain followed a session in which it had already added 21 paise on Monday to close at 93.77. Domestic markets were shut on Tuesday for the Diwali Balipratipada holiday, leaving Wednesday’s trade as the first chance to respond to the earlier gains.

Foreign money returns

Foreign institutional investors bought Indian equities worth 7,212.22 crore rupees on Monday, according to exchange figures. Across the first nine days of November, overseas investors have added a net 53,739 crore rupees to Indian shares, reversing two months of withdrawals that totalled 34,843 crore rupees in October and 35,861 crore rupees in September.

Market participants attributed the shift to a sell-off in global technology-linked stocks tied to artificial intelligence, alongside solid domestic earnings growth and reasonable valuations among large-cap companies. Forex dealers said the steady return of foreign capital has been the main source of support for the currency, which has ranked among the strongest performers in Asia in the current fiscal year.

Oil and the dollar pull in opposite directions

Brent crude, the global benchmark, traded 1.01 per cent higher at $92.41 a barrel in futures trading, though analysts said the broader trend in energy prices has been easing. Lower oil costs help India by trimming its import bill, which in turn eases demand for dollars.

Against that, the dollar index, which tracks the greenback against six major currencies, stood near 102.3 to 102.5. Stronger U.S. Treasury yields, lifted by inflation data hotter than expected, have raised expectations that the Federal Reserve could raise rates again in December, supporting the dollar and capping the rupee’s advance.

Outlook

Anuj Choudhary of Mirae Asset Sharekhan expects the rupee to hold a mildly positive bias, with spot dollar-rupee trading likely between 93.40 and 93.95. Anindya Banerjee of Kotak NEO said cheaper oil offers the rupee a cushion, while higher U.S. yields and a stronger dollar exert the opposite pressure. Amit Pabari of CR Forex Advisors said that if foreign inflows and softer crude persist, the pair could slide towards 93.50, with 93.00 the next level to watch.

What comes next

Traders will look to India’s inflation figures, due Thursday, as the next domestic signal for the currency. U.S. banks were closed on Wednesday for Veterans Day, which thinned trading in the dollar.