The Indian rupee strengthened sharply by 47 paise to 94.26 against the US dollar in early trade on Thursday, supported by record foreign-currency deposit mobilisation and strong underlying inflows.
The rupee opened at 94.30 against the dollar at the interbank foreign exchange market before improving to 94.26. It had closed at 94.73 on Wednesday, gaining 22 paise in the previous session.
Record inflows provide support
Forex traders said the rupee’s movement was supported by strong inflows and intervention by the Reserve Bank of India (RBI), which helped offset pressure from elevated crude oil prices and global bond yields.
India mobilised a record USD 127.226 billion through Foreign Currency Non-Resident (Bank), or FCNR(B), deposits as of August 31, according to the RBI. Including overseas foreign-currency borrowings and external commercial borrowings, total inflows under the measures stood at USD 136.377 billion.
IFA Global said the large inflows give the RBI greater room to defend the rupee, although they could also create a significant liquidity-management challenge for the banking system.
Oil and global tensions remain risks
The dollar index was trading 0.16% lower at 99.43. Brent crude, meanwhile, was marginally down at USD 95.48 per barrel amid renewed US-Iran tensions and concerns over possible disruption to oil flows through the Strait of Hormuz.
Higher crude prices remain a concern for India because the country imports a large share of its oil requirements.
Domestic equity markets also opened positively. The Sensex gained 221.17 points to 76,791.52, while the Nifty rose 59.55 points to 23,974.
Foreign institutional investors bought equities worth Rs 6,688.37 crore on a net basis on Wednesday, according to exchange data, providing further support to market sentiment.