The rupee strengthened by 8 paise to close at 94.43 against the US dollar on Friday, extending its gains for the sixth consecutive trading session as optimism over foreign inflows and improved risk appetite supported the domestic currency.
Forex traders expect the rupee to remain firm on robust foreign capital inflows and active intervention by the Reserve Bank of India (RBI). However, rising crude oil prices and escalating tensions between the US and Iran could limit further gains.
Six Sessions, One Direction
At the interbank foreign exchange market, the rupee opened at 94.53 against the US dollar. It touched an intra-day high of 94.43 and a low of 94.53 before ending the session at 94.43, up 8 paise from its previous close.
The latest rise marks the rupee's sixth straight session of gains. On Thursday, the currency appreciated 22 paise to close at 94.51 against the US dollar. It had settled at 94.73 on Wednesday, gaining 22 paise.
Rupee Builds on Recent Gains
The local currency had gained 27 paise to settle at 94.95 against the dollar on Tuesday, after rising 21 paise and 2 paise in the preceding sessions on Monday and Friday, respectively, PTI reports.
The sustained run of gains points to improved sentiment towards the rupee, although external risks remain. Anuj Choudhary, research analyst at Mirae Asset ShareKhan, attributed the rupee's rise to positive domestic markets, foreign inflows and buying by foreign institutional investors (FIIs).
"The Indian rupee gained on positive domestic markets, ... foreign inflows and FII buying also supported the rupee," Choudhary said.
Global Cues Offer Support
Choudhary expects the rupee to trade with a positive bias because of positive global markets and improved global risk sentiment. Foreign inflows and reduced expectations of a rate hike following dovish comments by US Federal Reserve Governor Christopher Waller could also support the currency.
However, elevated crude oil prices and any fresh escalation in tensions between the US and Iran could restrict sharp gains. Traders are also expected to take cues from the US non-farm payrolls report.
"USDINR spot price is expected to trade in a range of 94.15 to 94.75," Choudhary said.
Oil, Dollar Remain Key Risks
The dollar index, which measures the greenback's strength against a basket of six currencies, was trading 0.21% higher at 99.11 on safe-haven demand amid renewed US-Iran tensions.
Brent crude, the global oil benchmark, was trading 0.01% higher at $95.53 per barrel in futures trade amid escalating US-Iran tensions and concerns over possible disruption to oil flows through the Strait of Hormuz.
The combination of a stronger dollar and elevated crude prices could test the rupee's momentum, making foreign inflows and global risk sentiment important factors for its near-term direction.
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Sensex Gains, FIIs Sell Equities
In the domestic equity market, the Sensex rose 362.57 points to settle at 76,515.43, while the Nifty gained 24.25 points to close at 23,897.70.
Foreign institutional investors, however, sold equities worth ₹3,111.94 crore on a net basis on Friday, according to exchange data.
Meanwhile, India's foreign exchange reserves jumped $11.475 billion to a record high of $740.803 billion in the week ended Aug 28, the RBI said on Friday
