Rupee gains 31 paise to 94.86 against US dollar as RBI measures lend support

New Delhi: The rupee appreciated 31 paise to 94.86 against the US dollar in early trade on Thursday, extending its recovery amid the Reserve Bank of India's (RBI) forex interventions and liquidity-tightening measures.

At the interbank foreign exchange market, the domestic currency opened at 94.95 and strengthened to 94.86, gaining 31 paise from Wednesday's close of 95.17.

Market participants attributed the recovery to RBI intervention and the unwinding of long dollar positions, although persistent external pressures could restrict further appreciation.

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Rupee may strengthen further

CR Forex Advisors Managing Director Amit Pabari said the rupee's move beyond the 95.50–95.00 range has brought the 94.80 level into focus.

"A sustained break below 94.80 could open the door to another 50–75 paise of appreciation. And the reduced direct dollar demand from oil companies could support the momentum," Pabari added.

The RBI's special dollar window for oil companies has also helped ease immediate demand pressures in the spot forex market.

Inflation complicates RBI's policy outlook

Meanwhile, rising inflation has reinforced expectations of tighter monetary policy.

India's wholesale price inflation accelerated to 11.39 percent from 9.92 percent, with food inflation reaching 8.66 percent. Retail inflation stood at 5.54 percent.

Pabari said the simultaneous rise in wholesale and retail inflation leaves limited room for the RBI to adopt a dovish stance. Growing expectations of further rate hikes over the next 12 months could support the rupee through favourable interest-rate differentials and capital flows.

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Dollar weakens, crude prices decline

The dollar index, which measures the greenback against six major currencies, declined 0.54 percent to 101.99.

Brent crude futures fell 1.66 percent to USD 104.30 per barrel, providing additional support to the domestic currency.

Domestic equity markets also opened higher, with the BSE Sensex gaining 354 points to 73,157.43 and the NSE Nifty rising 96.15 points to 22,726.05.

However, foreign portfolio outflows remained a concern. Foreign Institutional Investors (FIIs) sold equities worth Rs 1,857.44 crore on a net basis on Wednesday, according to exchange data.

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