Business Desk – Rupee Vs Dollar Details: Indian Rupee strengthened on Monday (May 25). It opened at 95.34 against the US dollar, whereas on Friday (May 22) it closed at 95.69. With a gain of 35 paise in early trade, it reached its highest level in almost two weeks.
The currency’s improvement was due to an improvement in global risk sentiment as concerns over the Iran conflict eased. Also, comments by Reserve Bank of India Governor Sanjay Malhotra further strengthened confidence in the future outlook of the rupee.
In an interview with Mint, Malhotra said that RBI will do whatever is necessary to ensure orderly conditions in the foreign exchange market. He also indicated that, after the recent decline, the rupee now appears undervalued.
According to traders, the central bank intervened aggressively for two consecutive sessions following the governor’s comments, which helped the rupee recover from last week’s record low of 97 per dollar.
The rupee also followed the gains made by other Asian currencies amid a sharp fall in oil prices. Inspired by the hope that America and Iran are getting closer to a peace agreement. Brent crude futures fell 4.6%, falling below $100 a barrel for the first time in more than two weeks.
Low crude oil prices generally support the rupee, as India imports more than 80% of its oil needs. Falling oil prices reduce the country’s import bill and reduce pressure on inflation and current account deficit.
Asian equity markets climbed more than 1% as risk appetite improved, while the dollar index remained soft near 98.99, providing further support to emerging market currencies. However, traders cautioned that the market may remain volatile as uncertainty still remains over the Iran talks.
ING analysts said investors may be wary of overreacting to the headlines, noting that talks between the US and Iran have previously broken down after initial optimism. Despite Monday’s recovery, concerns remain about imported inflation.
State fuel retailers raised petrol and diesel prices for the fourth time in May, as companies tried to offset increased crude oil-related costs arising from the Iran conflict. In the currency derivatives market, the rupee was trading at 95.75 per dollar in the one-month non-deliverable forward (NDF) segment, suggesting that traders still expect some pressure on the currency.
Investment coming from foreign investors also remained slow. NSDL data showed that on May 21, foreign investors sold Indian shares worth $185.9 million and bonds worth $35 million; This reflects continued caution towards Indian assets amid global uncertainty.
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