The Indian rupee ended stronger against the U.S. dollar, lifted by inflows and a slump in the dollar index. The currency benefited from broad U.S. dollar weakness and declining crude oil prices.
Bollywood Fever: The Indian rupee closed stronger on Tuesday, supported by likely inflows and a significant decline in the dollar index, which buoyed Asian currencies across the board. The rupee ended the day at 83.7925 against the U.S. dollar, marking a nearly 0.1% increase from its previous close of 83.87.
During the session, the rupee reached an intraday high of 83.7650, its strongest level since August 5. According to a foreign exchange trader at a mid-sized foreign bank, dollar sales by at least two large U.S.-based banks, likely on behalf of custodial clients, contributed to the rupee’s gains.
The rupee benefited from both positive fundamentals and market flows on Tuesday. The dollar index fell to its lowest level since January, while crude oil prices also declined, adding to the rupee’s strength. Brent crude oil futures were last quoted down 0.2% at $77.48 per barrel, amid easing supply concerns and China’s economic weakness affecting demand outlook.
In the broader region, the rupee’s peers also showed strength, with the Indonesian rupiah leading gains with a 0.7% increase. “Asian currencies have continued to strengthen against the U.S. dollar on the back of broad U.S. dollar weakness and risk-on sentiment,” MUFG Bank noted in a report.
This week, the rupee found some relief after hovering near record low levels the previous week, driven by outflows from local stocks and strong dollar demand from importers. Benchmark Indian equity indexes, the BSE Sensex and Nifty 50, both ended the day higher by about 0.5%.
Looking ahead, the market’s focus will be on remarks from Federal Reserve policymakers, including Chair Jerome Powell, who is scheduled to speak on Friday. These comments, along with the minutes of the Fed’s July policy meeting due on Wednesday, will shape expectations regarding the extent and pace of rate adjustments by the U.S. central bank.
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