The Indian rupee strengthened against the US dollar on Tuesday, marking a positive close for the domestic currency. The local unit ended the trading session with a gain of 12 paise, settling at 90.18 (provisional) against the American dollar. This upward movement was primarily fueled by a robust performance in the domestic equity indices and a softening of the US dollar in the global markets.
Market Drivers and Trading Session
At the interbank foreign exchange market, the rupee opened strong at 90.20 against the US dollar. Throughout the day, it witnessed a fluctuating trend, oscillating between an intraday high of 90.10 and a low of 90.27. Ultimately, it managed to hold onto its gains, closing at 90.18, which compares favorably to its previous close of 90.30 on Monday. The positive sentiment in the domestic share markets provided crucial support for the rupee's ascent. Meanwhile, the dollar index, which measures the greenback's strength against a basket of six major currencies, was trading lower by 0.07% at 105.06, further aiding the rupee's cause.
Equity Market Support and Global Cues
The domestic equity benchmarks soared to new heights, creating a favorable backdrop for the currency. The BSE Sensex surged by 941.12 points or 1.28% to close at a record 74,671.28. Similarly, the broader NSE Nifty climbed by 223.45 points or 1.00%, settling at a lifetime high of 22,643.40. This bullish trend in equities attracted foreign capital and boosted investor confidence, indirectly supporting the rupee. Analysts noted that the rupee's gains were somewhat contained due to persistent foreign fund outflows and elevated crude oil prices, which remain a concern for India's current account deficit.
Outlook and Influencing Factors
Market participants are now closely watching a mix of domestic and international factors that could influence the rupee's trajectory in the coming sessions. The inflow of foreign investments, the global trend of the US dollar, and the movement of Brent crude oil futures will be key determinants. On Tuesday, Brent crude, the global oil benchmark, was trading marginally lower by 0.08% at $90.09 per barrel. Traders are also awaiting cues from the US Federal Reserve's monetary policy stance and domestic macroeconomic data for further direction. The rupee's ability to sustain these gains will depend on a combination of continued equity market strength and manageable levels of external pressures.
