Indian Rupee Strengthens Against US Dollar

The domestic currency recovered at closing due to foreign inflows into domestic bonds, the Financial Times Stock Exchange rebalancing and possible RBI action after having opened at a record low on Friday.

The local currency strengthened by 11 paise to close at Rs 83.54 against the greenback, according to Bloomberg. It had opened at a record low of Rs 83.60 against the dollar. It had closed at Rs 83.65 on Thursday.

"Indian rupee regained some composure after a fall yesterday as RBI sold and money from FTSE rebalancing hit the market. Today, Rupee opened higher after possible RBI action in NDF overnight. With a fall in Euro and rise in dollar index and Dollar vs Emerging market currencies. The rupee may not be able to sustain such gains," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

The decline in the Chinese yuan and Japanese yen had negatively impacted emerging market currencies. The domestic unit had hit an all-time closing low on Thursday.

"A major outflow of $1.7 billion from Vodafone's Indus Tower stake sale has exerted considerable pressure on the rupee and the surge in oil prices by nearly 10.5% may have been factors that triggered the rupee's all-time low," Amit Pabari, managing director of CR Forex Advisors said. 

On Friday, Brent crude was trading at $85.73 per barrel amid a solid demand outlook. The US dollar index was trading at 105.73.

"For the dollar/rupee, Rs 83.72, the high hit by the non-deliverable fund may remain the first important resistance to watch out," said Kunal Sodhani, vice president at Shinhan Bank. "If this breaks, it could trigger several stop losses, pushing the USD-INR pair towards Rs 83.85 levels, with Rs 83.40 currently serving as a base."