The Indian rupee fetched out of the intraday lows and closed slightly stronger against the U.S. dollar on Monday due to a weak American currency and falling global prices of the crude oil. The domestic unit also closed 2 paise higher at 90.16 (provisional) than it was traded before.
The rupee began trading in the interbank foreign exchange market at 90.23 and recorded initial volatility in the session. It rose to an intra day peak of 90.13 and also fell to a low of 90.25 but maintained its level and closed at 90.16 against the greenback. The small appreciation was recorded following a sharp fall of the rupee in the last session, which lost 28 paise to close at 90.18 on Friday.
Forex traders credited the recovery to the weakness in U.S. dollar. The dollar index that tracked the performance of the greenback in a basket of six major currencies was down by 0.34 per cent at 98.55, relieving pressure on the emerging market currencies, the rupee being among them.
A further boost to the upbeat mood was reduced prices of crude oil. The world oil price, which is the benchmark known as the Brent crude, dropped by 0.28 per cent to trade at USD 63.16 per barrel on future trade. The rupee is overall supportive of low oil prices since India is a large exporter of crude oil.
The stock markets in India also ended higher in the domestic equity front which further supported the currency. The yardstick Sensex rose by 301.93 or 0.36 per cent to finish at 83,878.17, and the wider Nifty rose by 106.95 or 0.42 per cent to end at 25,790.25.
Nonetheless, the worries were still present because of the outflows of foreign funds. Exchange data showed that the foreign institutional investors (FIIs) disposed equities to a total value of 3,769.31 crore on Friday.
In the meantime, the most recent weekly data released by the Reserve Bank of India indicated that the foreign exchange reserves of India had gone down by 9.809billion dollars and to 686.801billion dollars by the end of the week on January 2. The previous week, the reserves increased by 3.293 billion to 696.61 billion, which indicates the continuous instability in the external balances.
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