The Indian rupee appreciated by 18 paise to 96.18 against the US dollar in early trading on Friday, bolstered by a minor decline in crude oil prices, tentative alleviation of geopolitical tensions, and proactive intervention by the Reserve Bank of India (RBI) in the foreign exchange market.
Forex traders noted that market sentiment improved following remarks from U.S. Secretary of State Marco Rubio, suggesting that diplomatic efforts regarding the situation in Iran were progressing constructively. Although Rubio cautioned against excessive optimism, his comments provided temporary stability for the markets.
Consequently, Brent crude oil prices fell to approximately USD 104 per barrel, which alleviated some immediate pressure on the rupee, according to traders. At the interbank foreign exchange market, the rupee commenced trading at 96.30 against the dollar before climbing to 96.18, an increase of 18 paise from its previous close.
On Thursday, the rupee had recovered by 50 paise from an all-time low, closing at 96.36 to the dollar. Amit Pabari, Managing Director of CR Forex Advisors, attributed part of the rupee’s recovery to growing confidence in the RBI’s upcoming USD 5 billion buy-sell swap auction scheduled for May 26. This auction is expected to infuse more rupee liquidity into the banking system, enabling the RBI to manage currency fluctuations more effectively.
Pabari further emphasized that this move reinforces market confidence in the central bank’s willingness to address volatility should global conditions worsen. Meanwhile, the dollar index, which measures the greenback’s value against a basket of six currencies, was recorded at 99.24, down 0.01 percent.
In other developments, Brent crude, the international oil benchmark, was trading up 1.59 percent at USD 104.21 per barrel in futures. Pabari warned that while supportive measures such as RBI swaps or positive deal flows could strengthen the rupee, the lack of such triggers might gradually push the currency towards the 97.00 level. He noted that geopolitical tensions continue to pose a significant risk. A sustained close below 94.80 would be necessary to signal a more substantial trend reversal for the rupee.
On the domestic equity front, the Sensex rose by 332.39 points to 75,507.09, while the Nifty was up by 84.60 points, trading at 23,747.40. However, foreign institutional investors sold a net total of Rs 1,891.21 crore in equities on Thursday, according to exchange data.
Additionally, Commerce and Industry Minister Piyush Goyal stated that the government is considering multiple measures to tackle the expanding Current Account Deficit (CAD), which is challenging as the rupee weakens alongside a growing trade deficit.
