Indian rupee climbed by 39 paise to end at 85.70 to the US dollar on Thursday after a major correction on Wednesday, which ended at 86.09. The steep appreciation makes it the uppermost shutting up level of the currency since June 12 and represents a combination of home strength and global financial copy changes.
The rupee opened 17 paise stronger on Friday at 85.92 per dollar. The gains continued as the trading proceeded; it rose by up to 43 paise to reach 85.66, then dropped to close at 85.70 at the end of the trading session. Strong appreciation of the rupee is happening, though fears of volatility in the market are still present, and geopolitical tension is also persistent.
One of the reasons why the rupee remained strong was the sharp fall in the US dollar index, which reached a three-year low in the range of 97.5. The greenback was losing its value due to increasing speculations that the US Federal Reserve might cut rates, ebbing geopolitical tensions, and uncertainty of the US fiscal situation. All these increased the confidence level of investors in the emerging market currencies, which include the Indian rupee.
The market sentiment was also influenced by the oil prices. Brent crude that had gained 0.10 per cent during the morning trade resumed its downward path later on the day to drop 0.28 per cent. In the same manner, West Texas Intermediate (WTI) crude rose by 0.25 per cent but then lost its value toward the end of the session. It followed where U.S. President Donald Trump restated his policy of maximum pressure on Iranian oil exports, though a U.S. government report indicating that the crude stocks were reduced remarkably complicated the picture.
Some analysts believe that the rupee might stay afloat in the short run, provided there is a positive global risk appetite and the dollar weakens further. Nevertheless, a fluctuating oil price system, as well as geopolitical hotspots, are important risks to monitor.
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