Rupee Gains 31 Paise To 94.86, RBI Measures And Softer Oil Support Recovery

On October 15, the Indian rupee surged 31 paise to 94.86 against the US dollar, bolstered by Reserve Bank of India (RBI) measures, dwindling spot dollar demand, and the unwinding of excessive dollar holdings. The currency commenced at 94.95, subsequently climbing to 94.86 in interbank foreign exchange markets. Prior to this, it had concluded at 95.17 on Wednesday, marking a 19-paise gain.

While market observers affirmed central bank support, they cautioned that external economic factors might impede further appreciation. The RBI's interventions comprised a specialized dollar window for oil firms, alleviating their necessity to procure foreign currency through the spot market. Additionally, measures aimed at controlling liquidity and winding down large dollar positions have bolstered the rupee's ascent, as per traders.

Amit Pabari, managing director of CR Forex Advisors, noted the currency traversed the 95.50-95.00 range, compelling 94.80 into the spotlight. He opined that a persistent drop in USD/INR beneath 94.80 could potentially facilitate an additional 50-75 paise of rupee appreciation, with a potential boost from diminished direct dollar demand from oil firms.

India's wholesale inflation rose to 11.39 percent from 9.92 percent, while food inflation climbed to 8.66 percent, alongside consumer inflation of 5.54 percent. These inflationary pressures leave little room for a more lenient RBI policy stance. Pabari suggested that anticipations of rate hikes over the ensuing twelve months have intensified. If realized, tighter monetary policy could fortify the currency through advantageous interest-rate gaps and investment inflows.

Rice, sugar, and pulses became pricier ahead of Diwali, exacerbated by global supply disruptions, raising fresh inflation concerns. The dollar index slipped 0.54 percent to 101.99, while crude oil futures fell 1.66 percent to $104.30 a barrel. Domestic equities experienced a rise, with the Sensex at 73,157.43 and the Nifty at 22,726.05 during early trading hours.

Nevertheless, foreign institutional investors offloaded Indian shares worth ₹1,857.44 crore on Wednesday, underscoring overseas equity outflows as a risk to sustained currency gains.