Mumbai: The Indian rupee strengthened against the US dollar in early trading on Wednesday, October 21, gaining 29 paise to reach 94.62. Positive domestic equity markets, foreign fund inflows linked to the Jio Platforms IPO and support from the Reserve Bank of India (RBI) helped the local currency recover.
However, rising global crude oil prices and a stronger US dollar limited further appreciation.
Rupee Opens Stronger Against US Dollar
At the interbank foreign exchange market, the rupee opened at 94.78 against the US dollar before strengthening to 94.62, marking a 29-paise gain from its previous closing level.
On Monday, the domestic currency had declined marginally by 2 paise to settle at 94.91. Currency markets remained closed on Tuesday due to Dussehra.
Jio IPO Dollar Inflows Support Rupee
According to market analysts, foreign dollar inflows associated with the Jio Platforms IPO, which opened for public subscription on Wednesday, contributed to the rupee's recovery.
Aamir Makda, Commodity and Currency Analyst at Choice Broking, said foreign investors were using sell/buy currency swaps to manage dollar flows during the IPO allotment process.
Under these arrangements, investors sell dollars for rupees in the spot market while agreeing to repurchase dollars within a short period, generally less than a week.
RBI support also helped stabilise the domestic currency.
Crude Oil Prices Limit Rupee Gains
Despite the positive momentum, elevated international oil prices remained a major concern for the Indian currency. Brent crude futures climbed 1.42 per cent to USD 110.33 per barrel.
Meanwhile, the US dollar index edged up 0.06 per cent to 101.58, reflecting continued strength in the American currency.
Stock Market Rally Boosts Sentiment
Indian equity benchmarks also traded higher, with the Sensex jumping 665.10 points to 74,518 and the Nifty gaining 188.40 points to 23,077.35.
However, foreign institutional investors sold Indian equities worth Rs 1,148.64 crore on Monday. Looking ahead, Makda expects the rupee to trade between 94.00 and 94.75 against the US dollar during Wednesday's session.
