The Indian rupee closed at 94.39 per dollar on Thursday, bolstered by foreign portfolio investments and a weakening dollar index. The dollar index fell to 100.7 from 101.4, following a lackluster US jobs report that reduced the likelihood of a Federal Reserve rate hike, thereby strengthening Asian currencies.
Data from the National Stock Exchange (NSE) indicated that overseas funds were net buyers in the Indian capital markets on Friday, with investments worth ₹1,355 crore. However, local funds were net sellers, reflecting a cautious domestic sentiment.
Despite the recent appreciation, the rupee has depreciated by 0.4% in the current fiscal year. Market analysts expect the currency to trade between 95 and 95.50 on Monday, as traders remain wary of geopolitical developments involving the US-Iran and Russia-Ukraine conflicts.
“Improved global sentiment and a softer dollar helped the domestic currency recover from recent weakness. However, traders remain cautious ahead of the weekend as developments in the US-Iran and Russia-Ukraine conflicts could influence global risk appetite when markets reopen on Monday.”
Jateen Trivedi, VP currency research analyst at LKP Securities
Trading volumes were notably lower on Friday, particularly from foreign banks, due to the US markets being closed for the 4th of July weekend. The softer-than-expected US jobs growth has also tempered expectations of an imminent rate hike by the Federal Reserve.
"Improved global sentiment and a softer dollar helped the domestic currency recover from recent weakness. However, traders remain cautious ahead of the weekend as developments in the US-Iran and Russia-Ukraine conflicts could influence global risk appetite when markets reopen on Monday," said Jateen Trivedi, VP currency research analyst at LKP Securities.
Background
The rupee's recent movements are part of a broader trend influenced by global economic conditions and geopolitical tensions. The currency's performance is closely watched as it impacts import costs, inflation, and overall economic stability.
Looking ahead, market participants will keep an eye on geopolitical developments and US economic data, which could further influence the rupee's trajectory. The interplay between foreign investments and global economic indicators will remain crucial in determining the currency's future movements.
