The Indian rupee recovered marginally on Friday, rising 4 paise to 88.72 provisional against the US dollar, up a notch after hitting its all-time low of 88.76 on Thursday. The marginal rise was explained by the interplay of a weaker greenback against major currencies in the world and a fall in the global crude oil prices, which favored the local currency.
Even though the rebound occurred, forex traders observed that any meaningful gains by the rupee could not be made due to continuous foreign capital outflow and a risk-off mood in domestic equity markets. Moreover, some positive mood was given by the hopes of a breakthrough in India-US trade talks to avoid a further drop. The rupee started at 88.72 at the interbank foreign exchange market, trading in a close range of 88.67-88.73 and closing at 88.72, which was a minor recovery of four paise since the previous day’s close.
The rupee was also under the influence of global market hints. The dollar index that measures the performance of the greenback against a basket of six major currencies was 0.19 per cent below at 98.37, indicating that the US dollar is weak. In the meantime, the Brent crude futures were slightly stronger, 0.39% up at USD 69.15 per barrel, which means the average pressure on the costs of imports.
The equity markets were still volatile on the domestic front. Sensex decreased by 733.22 to 80,426.46, and Nifty went down by 236.15 to 24,654.70. The Foreign Institutional Investors (FIIs) sold equities worth 4,995.42 crore on Thursday, which indicated a shy mood due to global and domestic uncertainties.
In general, the minimal recovery of the rupee is a balancing process between favorable global signals and local issues, such as flight of funds and the underperformance of the equity market.
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