New Delhi: The rupee appreciated 9 paise to 94.80 against the US dollar in early trade on Monday, extending its recent gains as the Reserve Bank of India's (RBI) structural interventions in the foreign exchange market helped stabilise the domestic currency.
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At the interbank foreign exchange market, the rupee opened at 94.90 before strengthening to 94.80 against the greenback, compared with Friday's closing level of 94.89.
Forex traders said the rupee has recorded its strongest rally in seven months, with the currency moving closer to the psychologically important 94-per-dollar level. However, persistently high crude oil prices, elevated US Treasury yields and foreign capital outflows remain major challenges.
Market participants believe the rupee's ability to sustain gains below the 95-per-dollar mark could determine its near-term direction.
"With USDINR holding below 95.00 for the last 3 sessions, the focus shifts to 94.80–94.70. A sustained break below 94.80 could open the way towards 94.00 over the coming weeks.
"However, elevated crude prices remain a key risk, and the rupee's next move will depend on whether oil eases or sustains its surge," CR Forex Advisors MD Amit Pabari said.
The dollar index, which measures the US currency against six major global currencies, slipped marginally by 0.01 percent to 101.83.
Despite the rupee's recovery, global oil prices continued to threaten India's currency outlook.
Brent crude futures declined 1.88 percent to USD 107.79 per barrel, retreating from levels near USD 110.
However, attacks on commercial vessels near the Strait of Hormuz, disruptions to oil shipments and threats to Saudi Arabia's energy infrastructure have heightened concerns over prolonged supply shortages.
As India depends heavily on imported crude oil, sustained high prices could increase demand for dollars and exert fresh pressure on the rupee.
Meanwhile, India's foreign exchange reserves continued to shrink amid volatility in global currency markets.
According to RBI data released on Friday, the country's forex reserves fell by USD 8.578 billion to USD 726.027 billion during the week ended October 9.
This followed a sharper decline of USD 12.952 billion in the preceding week, when reserves stood at USD 734.606 billion.
The successive declines come amid the RBI's efforts to manage excessive currency volatility, although changes in reserve valuations and other factors can also influence the overall reserve position.
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Domestic stock markets began Monday's session under selling pressure, with the BSE Sensex falling 470.50 points to 74,318 and the NSE Nifty declining 147.10 points to 22,999.05.
However, foreign institutional investors returned as net buyers on Friday, purchasing Indian equities worth Rs 1,165.92 crore, according to exchange data.
While RBI intervention has helped the rupee regain ground, its ability to sustain the recovery will largely depend on crude oil prices, global dollar movements and the direction of foreign capital flows.
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