Rupee Gains Slightly Amid Geopolitical Pressures and Foreign Outflows
New Delhi: The Indian Rupee opened on a flat note in the morning trade on Friday, inching up by just 3 paise from its all-time low to 84.47 against the US dollar. While the positive sentiment from domestic equities provided some support, it was largely offset by ongoing geopolitical tensions and persistent foreign portfolio outflows.
The US dollar continued to strengthen in overseas markets, while Brent crude oil prices rose as the conflict between Ukraine and Russia kept investors on edge, adding to global economic uncertainty. In addition, foreign institutional investors (FIIs) maintained their selling stance in Indian equities, further strengthening demand for the dollar.
At the interbank foreign exchange, the rupee opened at 84.48 and traded within a narrow range, touching a high of 84.47 against the greenback, marking a modest gain of 3 paise from its previous close.
On Thursday, the rupee had depreciated by 8 paise, closing at an all-time low of 84.50 against the US dollar. This decline came after the Reserve Bank of India (RBI) allowed the rupee to fall in response to the stronger US dollar index, which climbed to 107.10, and US Treasury yields that remained elevated at 4.42 percent, according to Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
Despite its recent depreciation, Bhansali noted that the rupee has outperformed most other Asian currencies in November, largely due to RBI’s intervention using its foreign reserves. The Real Effective Exchange Rate (REER) for October 2024 increased to 107.21 from 105.34 in September, suggesting that the rupee was slightly overvalued against a basket of 40 currencies, and the RBI is likely to continue allowing a gradual depreciation.
Meanwhile, the dollar index, which tracks the strength of the US dollar against six major currencies, was up by 0.06 percent at 107.03. Global oil prices also continued their upward trajectory, with Brent crude rising 0.23 percent to USD 74.40 per barrel in futures trading.
The rupee also faced domestic headwinds following the indictment of Adani Group Chairman Gautam Adani and several senior executives in a multi-billion-dollar bribery and fraud case. The allegations, which include claims of bribes amounting to USD 250 million to secure solar energy contracts, have sparked negative sentiment, according to CR Forex Advisors’ Managing Director, Amit Pabari.
On the domestic equity front, the Sensex was trading 296.48 points, or 0.38 percent, higher at 77,452.27 points, while the Nifty rose 95.15 points, or 0.41 percent, to 23,445.05 points. However, FIIs continued their selling spree, offloading shares worth Rs 5,320.68 crore on Thursday, as per exchange data.
The rupee’s movements over the coming days will largely depend on global economic trends, domestic fiscal policies, and investor sentiment, particularly in light of the ongoing geopolitical tensions and market reactions to corporate scandals.
