The rupee strengthened by 11 paise to settle at 94.65 (provisional) against the US dollar on Wednesday, supported by a sharp decline in international crude oil prices and positive sentiment in domestic financial markets. Forex traders said lower oil prices, sustained foreign fund inflows and gains in Indian equities helped the local currency recover after its decline in the previous session.
At the interbank foreign exchange market, the rupee opened at 94.88 against the greenback and moved within a range of 94.59 to 94.93 during the trading session. It eventually settled at 94.65 (provisional), registering a gain of 11 paise over Tuesday's closing level.
On Tuesday, the domestic currency had weakened by 13 paise to end at 94.76 against the US dollar. Global crude oil prices remained under pressure, providing support to oil-importing economies such as India. Brent crude, the international oil benchmark, was trading 2.05 per cent lower at USD 75.50 per barrel in futures trading.
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According to Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, the rupee could face some pressure from a strengthening US dollar, supported by the US Federal Reserve's hawkish stance and weakness in global markets. However, he noted that falling crude oil prices and progress in diplomatic discussions between the United States and Iran could help limit losses in the domestic currency.
"We expect the rupee to trade with a negative bias on strengthening US dollar amid hawkish Fed and weak global markets. However, falling crude oil prices and progress in the US-Iran talks may support the rupee at lower levels. USD-INR spot price is expected to trade in a range of Rs 94.45-95.10," Choudhary said.
Meanwhile, the dollar index, which measures the performance of the US currency against a basket of six major global currencies, was trading 0.23 per cent higher at 101.63. Domestic equity markets also provided support to investor sentiment. The BSE Sensex surged 790.54 points, or 1.04 per cent, to close at 76,991.22, while the NSE Nifty advanced 197.55 points, or 0.83 per cent, to settle at 24,021.65.
Foreign institutional investors (FIIs) remained net buyers in the Indian market, purchasing equities worth Rs 17.86 crore on Tuesday, according to exchange data. The continued inflow of foreign capital, coupled with easing commodity prices, contributed to the rupee's appreciation during the session.
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