Rupee gains 14 paise to 95.85 against US dollar

New Delhi: The rupee strengthened by 14 paise to 95.85 against the US dollar in early trade on Friday, recovering from the previous session’s losses as domestic equities opened higher.

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At the interbank foreign exchange market, the currency opened at 95.92 before improving to 95.85. It had weakened by 26 paise to close at 95.99 on Thursday, just short of the closely watched 96-per-dollar mark.

Forex traders said persistent dollar demand from importers, particularly oil companies, elevated crude prices and a firm greenback following hawkish Federal Reserve signals continued to weigh on the rupee.

Expectations of RBI intervention to curb volatility, however, offered some support.

RBI intervention in focus

“We expect the Reserve Bank to lean against the move closer to 96,” said Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities.

India’s currency adjustment had remained orderly, supported by foreign exchange reserves of around USD 781 billion and policies that had contained the pass-through of energy prices better than in most importing countries, he said.

Banerjee identified US durable goods data, consumer inflation expectations and any official update on talks concerning the Strait of Hormuz as the next key triggers.

Markets were pricing in roughly a two-in-three chance of a Fed rate increase in October, he said. A reopening of Hormuz, which could lower oil prices, freight costs and petroleum product premiums together, was not priced in, he added.

Crude remains elevated

The dollar index, which measures the greenback against six major currencies, stood at 101.28. Brent crude futures eased 0.85 percent to USD 105.69 a barrel.

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Domestic equities opened higher, with the Sensex trading at 73,672.98 and the Nifty at 23,080.45.

Foreign institutional investors sold equities worth a net Rs 5,027.36 crore on Thursday, according to exchange data.

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