Indian Rupee Gains 30 Paise to Hit Monthly High of 95.38 Against US Dollar

The Indian rupee strengthened by 30 paise to close at 95.38 against the US dollar on Friday, reaching a monthly high. The currency was supported by persistent intervention from the Reserve Bank of India (RBI) and a decline in global oil prices, both of which eased downward pressure on the local unit.

The rupee opened the session at 95.58 and traded within a narrow band, fluctuating between an intraday low of 95.47 and a high of 95.25 during the day's trading.

A softer US dollar index further aided the rupee's gains. The dollar index, which measures the greenback against a basket of major currencies, stood at 100.7 on Friday, down from 101.2 in the previous session. A weaker dollar typically benefits emerging market currencies by making them relatively more attractive to investors seeking higher-yielding assets.

The RBI has been actively intervening in foreign exchange markets through dollar sales to curb excessive volatility in the rupee. Such interventions are a routine tool used by the central bank to smooth sharp fluctuations without targeting a specific exchange rate level. India's substantial foreign exchange reserves, which have historically ranked among the world's largest, provide the central bank with considerable capacity to sustain such intervention over extended periods.

Lower crude oil prices also provided relief for the rupee, as India imports the majority of its energy needs and elevated oil costs typically widen the country's current account deficit, weighing on the currency. India meets roughly 80% of its crude oil requirements through imports, making the rupee particularly sensitive to energy price movements.

Currency stability also carries broader implications for India's inflation trajectory, as a weaker rupee raises the cost of imported goods, including oil and industrial inputs, feeding into domestic price pressures that the RBI is mandated to manage.

Analysts expect continued support for the rupee at lower levels, citing the combination of central bank action, favorable oil price trends, and a weakening dollar as key factors that could sustain the currency's stability. Market participants are also closely watching the US Federal Reserve's policy trajectory, as shifts in American interest rate expectations influence capital flows toward emerging markets like India.

Source: Economic Times Markets