The Indian rupee managed to halt a four-session slide on Tuesday, closing stronger against the US dollar as global dollar weakness offered some relief to the domestic currency. However, muted equities at home and rising geopolitical unease overseas limited the extent of the recovery.
At the interbank foreign exchange market, the rupee began the session slightly lower at 90.22 against the US dollar. It moved within a narrow band of 90.08 to 90.25 through the day before ending at 90.18 (provisional), marking a gain of 12 paise from its previous close. On Monday, the currency had settled 10 paise weaker at 90.30.
Dollar Weakness Lends Support
Currency traders attributed the rupee’s modest appreciation primarily to a pullback in the US dollar index, which tracks the greenback’s performance against a basket of six major currencies. The index slipped after weaker-than-expected US manufacturing data dented confidence in the American economy.
Despite the softer dollar, traders said the upside for the rupee remained capped due to persistent global uncertainties and cautious sentiment in financial markets. Geopolitical tensions involving the US and Venezuela added to risk aversion, preventing a sharper rally in the domestic unit.
Analyst Flags Ongoing Pressures
Market participants remain watchful about external headwinds that could weigh on the rupee in the near term.
“We expect the Rupee to trade with a negative bias on risk aversion in global markets emanating out of geopolitical tensions between the US and Venezuela. Surge in crude oil prices and FII outflows may further pressurise the Rupee,” said Anuj Choudhary, Research Analyst, Commodities Research, Mirae Asset Sharekhan.
At the same time, Choudhary noted that a weaker dollar following disappointing US data, along with any intervention by the Reserve Bank of India, could provide support to the currency at lower levels, according to a PTI report.
Oil Prices, Equities Add To Volatility
Crude oil prices edged higher, with Brent crude futures trading above USD 62 per barrel, a factor that tends to strain India’s import bill and weigh on the rupee. Meanwhile, domestic equity markets remained under pressure, reflecting cautious investor sentiment.
The benchmark Sensex ended the day sharply lower, while the Nifty also finished in the red. Foreign institutional investors continued to pare exposure, selling equities worth Rs 36.25 crore on Monday, according to exchange data.
