Rupee Roars To Two-Month High, Jumps 67 Paise As FCNR-B Inflows Surge

Mumbai witnessed a significant surge in the value of the Indian rupee on Thursday, September 3, as it surged 67 paise to touch a two-month high against the US dollar. This sharp rally was propelled by stronger-than-anticipated Foreign Currency Non-Resident Bank (FCNR-B) inflows, which bolstered investor sentiment. The rupee commenced the day at Rs 94.30 per US dollar, contrasting with the previous day's closing level of Rs 94.97. This marked the rupee's most substantial single-day gain since June.

The Reserve Bank of India (RBI) played a pivotal role in this rally, disclosing that banks had successfully mobilized a staggering $127.23 billion through FCNR-B deposits. When external commercial borrowings and overseas foreign currency borrowings are factored in, the cumulative inflows reached a remarkable $136.38 billion. This surge in inflows followed the RBI's facility announced on June 8, aimed at attracting foreign currency into India's banking system and fortifying external buffers.

The heightened inflows came after a period of easing selling pressure over nine trading sessions. As of August 21, banks had already mobilized $65.4 billion through FCNR-B deposits, which skyrocketed to $127.23 billion by the end of the month. In response to this robust outflow, the RBI expedited the closure of the FCNR-B deposit mobilization window from September 30 to August 31.

Currency experts anticipate a narrow trading range for USD-INR, projecting a range of Rs 94.10 to Rs 95.50. A decisive break below Rs 94.10 could potentially propel the rupee down to Rs 93.50. The RBI's enhanced foreign exchange position also provides greater flexibility to replenish reserves and curb excessive depreciation of the Indian currency.

However, risks persist, as Brent crude prices hover near $95 per barrel and global bond yields stay elevated, potentially exerting downward pressure on the Indian currency amidst ongoing geopolitical tensions.