Rupee Rises 3 Paise to 89.95 Against the US Dollar in Early Trade
The rupee experienced a slight uptick, rising by 3 paise to 89.95 against the US dollar in early trade on Tuesday. This increase was driven by a weaker dollar and positive industrial performance indicators. The rupee’s performance is noteworthy given the dynamic conditions in the foreign exchange market.
Factors Supporting the Rupee’s Rise
– Weaker Dollar: The dollar index, which measures the currency’s strength against a basket of six currencies, was down by 0.03% at 98.01.
– Strong IIP Data: The Index of Industrial Production (IIP) showed a remarkable growth of 6.7% for November, exceeding expectations of 2.5% and marking a significant rise from the prior month’s growth of just 0.5%. This performance has been noted as the highest in 25 months.
– Robust Economic Indicators: The year-over-year growth in IIP now stands at 3.30%, up from 2.70% the previous month.
Despite these positives, several factors served to limit the rupee’s gains:
Limitations on the Rupee’s Growth
– FII Outflows: Foreign institutional investors contributed to a decline in equity demand, offloading assets worth ₹2,759.89 crore on Monday.
– Crude Oil Price Increases: Marginal increases in crude oil prices have added pressure, with Brent crude trading 0.03% higher at USD 61.96 per barrel.
– Equity Market Trends: The domestic equity market saw the 30-share Sensex fall by 209.32 points to 84,486.22, while the Nifty dipped 63.25 points to 25,878.85. A weak opening in these indices is typically correlated with lowered demand for the rupee.
Market Insights
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, remarked on the RBI’s actions aimed at stabilizing the currency at its upper limits. He explained that foreign portfolio investors buying dollars while selling equities have influenced the ongoing support for the dollar.
Conclusion
As the rupee rises to 89.95 against the US dollar, market participants remain cautiously optimistic. While supportive economic indicators like robust IIP data are promising, ongoing foreign investment trends and crude oil price fluctuations will be critical to watch in the coming sessions. The interplay of these factors will shape the future outlook of the rupee in the forex market.