Rupee strengthens against US dollar as foreign inflows, softer crude prices support sentiment

New Delhi: The Indian rupee strengthened against the US dollar in early trade on Wednesday, supported by renewed foreign portfolio inflows, relatively softer crude oil prices and improving geopolitical sentiment.

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The domestic currency opened around 93.71 at the interbank foreign exchange market before appreciating to 93.70 against the greenback, gaining 7 paise from Monday's closing level of 93.77.

The recovery comes amid a sharp turnaround in foreign institutional investment, with overseas investors returning to Indian equities following two consecutive months of substantial withdrawals.

According to depository data, foreign investors infused Rs 53,739 crore into domestic equities during the first nine days of November, reversing net outflows of Rs 34,843 crore in October and Rs 35,861 crore in September.

On Monday alone, foreign institutional investors purchased equities worth Rs 7,212.22 crore, according to exchange data.

Foreign inflows strengthen rupee outlook

Market participants attributed the renewed foreign buying to attractive large-cap valuations, stronger-than-expected corporate earnings and a shift in global investor sentiment amid volatility in artificial intelligence-linked stocks.

CR Forex Advisors Managing Director Amit Pabari said the rupee's underlying momentum remained positive, with sustained foreign inflows potentially pushing the USD/INR pair towards 93.50, followed by 93.00.

However, analysts cautioned that the currency's trajectory would depend on the sustainability of foreign capital inflows, global oil prices and movements in the US dollar.

Crude oil and dollar movements remain key

Brent crude futures were trading around USD 92.41 per barrel, up 1.01 percent, although prices remained below their recent elevated levels.

The dollar index, which measures the US currency against a basket of six major currencies, edged up 0.03 percent to 102.26.

Anindya Banerjee, Head of Commodity and Currency Research at Kotak NEO, said lower crude prices offered support to the rupee by reducing India's import bill, while elevated US bond yields and a stronger dollar continued to exert countervailing pressure.

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Investors are also awaiting India's inflation data, scheduled for release on Thursday, for further indications about the domestic monetary policy outlook.

Indian financial markets remained closed on Tuesday for Diwali Balipratipada. On Monday, the rupee had appreciated 21 paise to settle at 93.77 against the US dollar.

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