Revival in foreign flows to back Indian rupee, dollar strength offers resistance

Mumbai - The Indian rupee is poised to open largely unchanged on Thursday as a revival in foreign equity inflows balances the strength of the dollar, which has climbed to a one-month high. The rupee is forecast to trade between 93.68 and 93.74 against the dollar, up from 93.69 on Wednesday, its highest level since April. Provisions indicate $1.34 billion flowed into Indian equities on Wednesday, bringing monthly inflows to just under $8 billion.

This shift in foreign investment is significant, as investors have been wary of tighter U.S. regulations on AI data center construction following the Democratic Party's election win. The return of capital to India, seen as a diversification opportunity, has provided a much-needed boost to the rupee and supports the Reserve Bank of India's efforts to stabilize the currency.

Oil prices have also eased, with Brent crude trading around $92 a barrel, down from a peak of $118 just two weeks prior. The currency market has pivoted decisively, with traders now focusing on the sustainability of the positive sentiment and foreign inflows. The dollar index remained near a one-month high against major currencies in Asian trading on Thursday, buoyed by expectations of a Federal Reserve rate hike.

The Federal Reserve's tightening expectations were reinforced by stronger-than-anticipated October inflation data and hawkish comments from U.S. central bank officials.