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Rupee Recovers: Dollar Weakness Boosts Indian Currency
6 Jan
Summary
- Indian rupee appreciated 12 paise against the dollar on Tuesday.
- Decline in the US dollar index and weak US economic data supported the rupee.
- Geopolitical tensions and FII outflows may pressure the rupee going forward.
The Indian rupee witnessed a recovery on Tuesday, appreciating by 12 paise to settle at 90.18 against the US dollar, thus snapping its four-day losing streak. This positive movement in the domestic currency was largely influenced by a concurrent decline in the US dollar index, which tracks the greenback's strength against a basket of major currencies.
The appreciation, however, faced headwinds from a weak performance in domestic equity markets and persistent geopolitical tensions between the United States and Venezuela. These factors played a role in limiting the rupee's gains, despite supportive global cues. Furthermore, India's services sector growth moderated in December, with the HSBC India Services PMI Business Activity Index falling to 58.0, indicating a slower expansion rate compared to the previous month.
Forex analysts anticipate that global risk aversion stemming from geopolitical concerns, coupled with potential foreign institutional investor (FII) outflows and rising crude oil prices, could exert downward pressure on the rupee in the near future. Nevertheless, any intervention by the Reserve Bank of India (RBI) and continued weakness in the dollar due to disappointing US economic data may provide support to the rupee at lower levels.
