Rupee Gains Ground Despite Dollar Pressure, Climbs 7 Paise To 94.05 As Foreign Investors Return

Mumbai witnessed the Indian rupee strengthening slightly against the US dollar on Friday, climbing 7 paise to 94.05 amid ongoing foreign institutional investor (FII) investments and easing crude oil prices. However, the robust dollar curbed the rupee's gains, confining it to a limited trading band. The rupee touched a seven-month peak of 93.69 against the greenback due to FPI inflows and lower crude oil prices.

The rupee began at 94.07 in the interbank foreign exchange market before climbing to 94.05 against the US dollar. Market participants attributed the slight improvement to renewed foreign investments and favorable external circumstances. Despite the dollar index edging down marginally by 0.02% to 103.15, Brent crude futures slipped 0.37% to $95.47 per barrel.

Forex advisors suggested that the rupee's recent rise from 97 to 94 might lead to a short-term correction, with USD/INR potentially moving between 94.50 and 95.00 before potentially falling to 93. Inflationary pressures, with India's retail inflation hitting 6.09% in October, have fueled speculation of additional interest rate hikes by the Reserve Bank of India.

This could bolster the rupee by enhancing the appeal of domestic financial assets. The rupee slipped 6 paise to 93.77 against the dollar, as a strong greenback tightened its grip, even as falling crude prices offered some respite. FII buying, totaling ₹7,830.60 crore on Thursday, bolstered the currency, but domestic stock markets opened lower on Friday.

The Sensex fell 460 points to 81,441.17, while the Nifty dropped 179.05 points to 25,119.50. Currency traders will closely watch foreign fund flows, crude oil prices, and forthcoming RBI policy decisions for further guidance.