The Indian rupee jumped sharply against the US dollar on Wednesday, recovering from its all-time closing low, led by easing dollar index on increased bets of US Federal Reserve rate cuts. Reports of RBI intervention and decline in crude oil prices also boosted the local unit to a near one-month high.
At the interbank foreign exchange market, the rupee opened at 88.74 against the US dollar, then gained momentum and touched 87.93 for the first time since mid September, registering a gain of 88 paise from its previous close. It was last at 88.3250, up 0.5% against the American currency.
On Tuesday, the rupee depreciated 13 paise to close at an all-time low of 88.81 against the greenback.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.20% lower at 98.85.
The US dollar weakened after the US Fed Chair Jerome Powell indicated more rate cuts in the current year as the unemployment rate rises and also flagged concerns on stubborn inflation. Asian currencies and equities gained as the dovish tilt from the Fed chief outweighed some of the lingering worries over US-China trade tensions.
Moreover, the Reserve Bank of India (RBI) also stepped in forcefully to curb pressure on the rupee, kicking off dollar sales through state-run banks before the usual 9:00 a.m. market open, multiple traders told Reuters.
Falling crude oil prices further supported the local currency. Brent crude oil prices declined 0.37% to $62.16 a barrel, while the US West Texas Intermediate (WTI) crude futures were down 0.29% to $58.54.
The Indian stock market benchmark indices, Sensex and Nifty 50, rallied more than half a percent each, fuelling positive sentiment in the rupee.
Rupee Outlook
According to Amit Pabari, MD, CR Forex Advisors, support for the rupee lies around 88.20 – 88.40, while resistance remains near 88.80 – 88.85.
“The probability of dipping below 88.50 appears higher — around 70% — suggesting that some appreciation could emerge if sentiment steadies. A decisive move below 88.40 could mark the beginning of a measured recovery, while a break above 88.85 may reopen the gates of volatility,” Pabari said.
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