Rupee Opens Stronger Against Dollar Amid Steady Crude Prices

The Indian rupee opened stronger on Friday amid stabilising brent crude prices, post Securities and Exchange Board of India's regulatory curbs on derivatives trading.

The Indian currency appreciated two paise to open at Rs 83.95 against the US dollar. It had closed at Rs 83.97 on Thursday, according to Bloomberg data. 

"The rupee, after briefly strengthening to 83.50 last month, has retreated, now hovering around the 84 mark. This comes on the heels of a 2% drop in Indian equities during yesterday’s trading session," said Amit Pabari, managing director at CR Forex Advisors.

The most significant factor is the escalating conflict in the Middle East between Iran and Israel, which intensified after Iran's missile strikes on Israeli targets. This geopolitical flare-up has sent oil prices soaring by 8.65% this week, he added.

However, brent crude prices steadied after their biggest one-day gain to trade 0.08% lower at $77.56 per barrel, while the dollar index inched 0.06% lower to 101.92.

"The Securities and Exchange Board of India's recent regulatory tightening on derivatives trading has played a role in curbing market enthusiasm," said Pabari.

The new rules, including higher entry barriers and increased margin requirements, are aimed at controlling the retail-driven surge in futures and options trading. However, these measures have also led to reduced trading volumes, worsening the market's decline, he said.

Despite these headwinds, the rupee remains relatively stable, thanks to the Reserve Bank of India and its substantial forex reserves, Pabari said. The RBI appears to be actively managing the currency's movement, preventing the USDINR pair from breaching the 84.10 level, he said.

The pair is expected to trade within a narrow range of 83.80 to 84.00, as the central bank keeps a close watch on both global and domestic developments, Pabari said.