Rupee Posts Weekly Gain as Softer Dollar and Strong Capital Inflows Boost Sentiment
Indian currency strengthens against the US dollar amid easing Federal Reserve expectations, steady foreign investments and improving risk appetite.
New Delhi, Jul 31: The Indian rupee ended the week on a stronger footing, supported by a softer U.S. dollar, sustained foreign capital inflows and improved investor confidence following the U.S. Federal Reserve’s latest policy announcement.
Currency markets remained volatile through the week, but the rupee managed to recover as expectations of aggressive interest-rate tightening in the United States eased. The Federal Reserve’s decision to keep benchmark rates unchanged encouraged investors to shift towards emerging market assets, benefiting the Indian currency.
Dealers said foreign institutional investors continued to show interest in Indian equities and debt markets, helping improve dollar liquidity in the domestic market. Stable macroeconomic fundamentals and optimism over India’s growth outlook also provided support to the rupee.
A decline in the U.S. dollar index after weaker-than-expected inflation data further strengthened emerging market currencies. Although the greenback regained some ground later, the rupee remained resilient due to balanced demand and improved market sentiment.
However, rising crude oil prices amid escalating geopolitical tensions in the Middle East limited the rupee’s gains. Since India imports a significant portion of its crude oil requirement, higher energy prices could increase import costs and put pressure on the domestic currency if the trend continues.
Market participants are now awaiting key domestic macroeconomic indicators and global economic data for fresh cues on currency movements. Analysts believe the rupee is likely to trade within a narrow range in the near term, with global interest-rate expectations, oil prices and foreign investment flows remaining the primary drivers.
Financial experts expect the Indian currency to remain relatively stable as long as foreign inflows continue and inflation remains under control, though geopolitical developments could lead to intermittent volatility in the forex market.
