Rupee Rises 18 Paise to 96.18 Against US Dollar in Early Trade
Mumbai: The rupee rose 18 paise to 96.18 against the US dollar in early trade on Friday on the back of a slight fall in crude oil prices, tentative signs of easing geopolitical tensions and the RBI’s active intervention in the market. Forex traders said the markets had eased a bit after US Secretary of State Marco Rubio’s comments implying that diplomatic talks related to the situation in Iran were moving in a constructive direction.
Although Rubio said he did not want to be “overly optimistic,” the comments were enough to temporarily calm markets.
As a result, Brent crude cooled near the USD 104 level, reducing pressure on the rupee, traders said.
At the interbank foreign exchange market, the rupee opened at 96.30 against the dollar and then rose to 96.18 in the early hours, up 18 paise from the previous close.
On Thursday, the rupee rose 50 paise from its all-time low to settle at 96.36 against the US dollar.
Amit Pabari, MD, CR Forex Consultants, said, “Another key reason behind the recovery of the rupee is increased confidence in the USD 5 billion bid-ask swap auction planned by the RBI on May 26. The move is expected to provide more rupee liquidity to the banking system and improve the ability of the RBI to manage excessive exchange rate volatility.” he said.
This strengthens market confidence that the central bank is ready to actively moderate volatility if global conditions deteriorate further, Pabari added.
Meanwhile, the dollar index, which measures the dollar’s strength against a basket of six currencies, is trading at 99.24, down 0.01 percent.
Global oil reference Brent crude oil is trading at $104.21 per barrel, up 1.59 percent in futures.
“Supportive measures such as RBI swaps or positive deal flows could strengthen the rupee, but the absence of such triggers could gradually push the pair towards 97.00 levels,” Pabari said, adding that geopolitical tensions remain the key risk factor. He said a sustainable close below the 94.80 level would be needed to signal a broader trend reversal in the rupee.
In the domestic equity market, Sensex rose 332.39 points to 75,507.09 in early trade, while Nifty was trading 84.60 points higher at 23,747.40.
According to stock exchange data, Foreign Institutional Investors sold shares worth 1,891.21 billion rupees on a net basis on Thursday.
Meanwhile, Commerce and Industry Minister Piyush Goyal on Thursday said that the government is considering several steps to control the Current Account Deficit (CAD), which has widened with the weakening of the rupee and widening of the trade deficit.
