The Indian rupee surged 31 paise to 95.12 against the US dollar in early trade on Monday, marking its strongest level since July 7 and continuing the currency's remarkable rally. According to The Hindu, the rupee opened at 95.15 against the greenback before rising further to 95.12, building on its previous session where it settled at 95.43 per dollar against the previous close of 95.68 per dollar. This latest surge has been reinforced by a drop in crude oil prices and continued central bank intervention, with the currency gaining around 1.2% last week and maintaining its strongest weekly performance since March. The currency has remained supported after the RBI stepped in aggressively throughout the week and continued to provide support through dollar sales by state-owned banks during periods of thin market liquidity. As per Choice Broking's Aamir Makda, the rupee is expected to continue moving back and forth in today's session, gaining strength against the US dollar due to modest pullback in oil prices, while expectations of continued intervention from the Reserve Bank of India keep it supported.
The rupee's climb has been boosted by the dollar's biggest slide in three months and a massive, suspected currency intervention by the Japanese Government to prop up the yen, providing dual support for the domestic currency. According to The Hindu, Brent crude futures, the global oil benchmark, were trading 5% lower at $83.66 per barrel, with U.S. President Donald Trump on Sunday saying he decided to hold off on ordering American forces to carry out new strikes against Iran at the urging of Gulf allies Qatar, Saudi Arabia, and the United Arab Emirates. The president added that a plan was in place for the US forces to carry out "the biggest attack since World War II" on Sunday, however, he decided to scrap the plan and give diplomacy more time to play out after hearing from key Gulf leaders — including Saudi Crown Prince Mohammed bin Salman — as well as at the request of unnamed Iranian officials. The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.17% lower at 99.74. The currency had previously benefited from crude oil prices easing to around $87.17 per barrel from $91.38 per barrel in the previous session, with FII flows having remained positive over the past few sessions, contributing to the overall positive sentiment in the domestic equity markets.
The rupee's recovery has been significantly supported by strong foreign currency inflows under the RBI's concessional swap facility announced in June. According to CNBC TV18, the central bank said on August 1 that the scheme had mobilised $40.82 billion in inflows till July 31, with $36.73 billion coming through Foreign Currency Non-Resident (Bank) deposits, $2.58 billion via Overseas Foreign Currency Borrowings, and $1.52 billion raised through External Commercial Borrowings. The facility, announced on June 5 and operational from June 8, allows banks to swap eligible foreign currency inflows with the RBI at concessional terms to attract overseas capital, strengthen forex reserves and improve external sector liquidity. Higher inflows also provide the RBI with greater flexibility to intervene in the foreign exchange market when required, with market participants noting that the RBI remained active in the foreign exchange market last week, selling dollars to curb excessive volatility. The combination of these factors has enabled the rupee to outperform other oil-sensitive Asian currencies, including the Indonesian rupiah and the Philippine peso.
According to The Hindu, Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP, said the rupee was supported by lower Brent crude oil prices, a weaker dollar, and sustained foreign portfolio inflows, and continued RBI presence in the foreign exchange market on Friday. "As Brent oil prices fell to $84 per barrel after Trump delayed strikes on Iran, the rupee opened at 95.15 on Monday and is expected to trade in the range of 95.00-95.50," he said. The rupee stayed in positive territory for the fifth consecutive day on Friday, gaining 7 paise to settle at 95.43 against the U.S. dollar. Stronger levels saw dollar buying by defence firms, while weaker levels saw dollar sales by nationalised banks, likely on behalf of the central bank. Exporters are advised to utilise any intraday upticks towards 95.65-95.75 to sell dollars, while importers may consider buying on dips near the 95.20 level. On the domestic equity market front, India's BSE Sensex jumped 470.06 points to 78,564.70 in early trade, while Nifty climbed 150 points to 24,532.95, as lower crude oil prices lifted sentiment in the import-dependent economy. Foreign Institutional Investors purchased equities worth ₹277.48 crore on a net basis on Friday, according to exchange data.
The RBI data released on Friday showed that the country's forex reserves jumped $6.118 billion to $682.354 billion during the week ended July 24, according to The Hindu. In the previous reporting week, the overall reserves had increased $1.08 billion to $676.237 billion. The central government's fiscal deficit stood at 18.2% of the full-year target at the end of June, according to data released by the Controller General of Accounts (CGA) on Friday. This improvement in forex reserves and fiscal position has provided additional support for the rupee's strength, with the currency benefiting from sustained foreign portfolio inflows and continued RBI presence in the foreign exchange market. The sustainability of the rupee's recovery will depend on several factors, including whether crude oil prices remain contained, the pace of foreign currency inflows, the US dollar's global trend and the RBI's intervention strategy.
