FX.co ★ Rupee Rises to 6-Week High

The Indian rupee hovered around 94.2 per dollar, extending its rally to a six-week high as improving capital flows lifted investor sentiment. Market participants noted better foreign-exchange inflows, with higher investment in Indian bonds and a moderation in foreign equity outflows both supporting demand for the local currency. This represents a shift from the earlier period of one-way dollar buying that had weighed on the rupee in recent weeks.

Additionally, the recent decline in crude oil prices, following an easing of geopolitical tensions, has reduced pressure on India’s import bill, providing further support to the currency. Interbank market sentiment has also improved, with traders now more willing to take positions on both sides of the market instead of consistently buying dollars on dips, reflecting greater confidence in the rupee’s outlook.

Even so, the rupee’s advance continues to face headwinds from a stronger US dollar. Expectations of a tighter Federal Reserve policy stance, driven by persistent inflation concerns, are sustaining demand for the greenback and limiting the extent of the rupee’s gains.