The Indian rupee logged its best day in nearly a month, gaining nearly 50 paise to close at 94.96 against the US dollar on Tuesday, marking a significant turnaround from Monday's close when the currency settled at 95.40 against the US dollar. As per The Economic Times, the rupee ended stronger after reversing losses from the past three days, demonstrating remarkable resilience amid favorable market conditions. The currency traded in the range of 95.48 and 95.95 during Tuesday's session, with the central bank likely selling dollars around 95.45 levels to support the currency. Jateen Trivedi, VP currency research analyst at LKP Securities, noted that "the rupee traded stronger after reports said that Saudi Arabia cut its August crude oil prices for Asian buyers amid easing geopolitical tensions in West Asia." Dilip Parmar, currency research analyst at HDFC Securities, added that "the rupee was trading with a positive sentiment and FPI outflow in equity too has eased. The currency has reversed all losses from the past three days."
The rupee's Tuesday surge was attributed to Saudi Arabia's historic decision to slash August crude oil prices for Asia by $11 per barrel, marking the steepest cut in 26 years amid improving supply conditions, as reported by The Economic Times. Brent crude oil futures were trading around $72.88 a barrel, providing additional support to the currency. Oil prices have fallen nearly $50 a barrel from their recent peak, when the rupee itself was tantalizingly close to breaching the 97 mark to the dollar. Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted that "the buying by Indian oil companies also was indicated by the fact that Indian Oil and HPCL had placed tenders to buy 7 million barrels of crude thus keeping the US dollar well bid in the last few days." Forex traders attributed the currency's gains to a decline in the Middle East risk premium and smoother movement of vessels through the Strait of Hormuz, factors that helped keep oil prices lower. Brent crude prices are trading higher as renewed security concerns in the Strait of Hormuz have offset expectations of strong global crude supplies following Saudi Arabia's steep cuts for Asian buyers.
Domestic equity markets provided strong support to limit the rupee's downside, with resumption of foreign portfolio investor (FPI) flows into Indian equities also helping stabilize the currency, as reported by The Economic Times. The rupee was trading with a positive sentiment and FPI outflow in equity too has eased, according to currency analysts. Foreign Institutional Investors had purchased equities worth ₹243.03 crore in the domestic equity market on Monday, according to exchange data, showing continued foreign investor confidence in Indian markets. The Nifty 50 extended gains for a fourth consecutive session, with underlying sentiment supported by crude prices continuing to fall in international markets following OPEC+'s decision to raise output and strong quarterly updates from banking heavyweights like HDFC Bank. The rupee has depreciated 0.4% in the fiscal year so far, but Tuesday's gains suggest a potential reversal of this trend.
Asian currencies traded mixed against the US dollar in early trade on July 7, with the Indonesian rupiah emerging as the worst performer, declining 0.18%, followed by the Chinese renminbi, which slipped 0.20%, and the Thai baht weakening 0.14%, as reported by Moneycontrol. The Taiwan dollar fell 0.08%, while the South Korean won and Japanese yen were largely flat, trading lower by 0.02% and 0.01% respectively. However, the Philippine peso outperformed its regional peers, gaining 0.11%, the Malaysian ringgit rose 0.09%, and the Singapore dollar edged up 0.03% against the greenback. The dollar index eased modestly to 100.9, from 101.2 a day ago, with a reading above 100 indicating a relatively stronger dollar. According to The Economic Times, the dollar was on shaky ground as investors continued to pare back expectations of U.S. rate hikes this year following an underwhelming jobs report that came in far below expectations.
The rupee is expected to trade in the range of 94.75 to 95.50 on Wednesday, according to market analysts, suggesting continued stability ahead. Traders also expect the RBI to continue intervening in the foreign exchange market to curb excessive volatility, as reported by CNBC TV18. The central bank has reportedly been selling dollars at various levels and may have intervened through state-run banks when the rupee neared 95.50 on Monday. India's forex reserves dropped $5.654 billion to $666.933 billion during the week ended June 26, the RBI said on Friday, as reported by NDTV Profit. Uncertainty prevailed over the progress of US-Iran peace talks, keeping a geopolitical risk premium in the market and contributing to the rupee's volatility. Market participants will now watch the minutes of the US Federal Reserve's June 16-17 policy meeting, due on Wednesday (July 8), for fresh signals on the future path of US interest rates, which could influence the dollar and emerging market currencies, including the rupee.
