Rupee rises 31 paise to 94.86 against US dollar in early trade

MUMBAI: The rupee appreciated 31 paise to 94.86 against the US dollar in early trade on Thursday, supported by the ongoing impact of the Reserve Bank of India's structural forex interventions and liquidity-tightening measures.

Market participants attributed the rupee's continued appreciation to central bank intervention and the unwinding of long dollar positions.

However, ongoing external macroeconomic pressures are likely to temper further gains, they said.

At the interbank foreign exchange market, the rupee opened at 94.95, then gained ground to touch 94.86, registering a gain of 31 paise over its previous close.

On Wednesday, the rupee appreciated 19 paise to close at 95.17 against the US dollar.

The rupee has now crossed 95.50–95.00 range, bringing 94.80 into focus, CR Forex Advisors MD Amit Pabari said.

"A sustained break below 94.80 could open the door to another 50–75 paise of appreciation. And the reduced direct dollar demand from oil companies could support the momentum," Pabari added.

Meanwhile, India's WPI inflation accelerated to 11.39 per cent from 9.92 per cent, with food inflation reaching 8.66 per cent. Combined with CPI inflation of 5.54 per cent, dual inflation pressure makes it very difficult for the RBI to turn dovish.

Market expectations of rate hikes over the next 12 months have also increased. If tighter monetary policy materialises, it could support the rupee through favourable interest-rate differentials and carry flows, Pabari said.

Meanwhile, the RBI's recent forex measures, including the special dollar window for oil companies, are helping ease immediate pressure on the spot market.

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.54 per cent at 101.99.

Brent crude, the global oil benchmark, was trading lower by 1.66 per cent at USD 104.30 per barrel in futures trade.

On the domestic equity market front, Sensex climbed 354 points to 73,157.43 in early trade, while the Nifty was trading up 96.15 points to 22,726.05.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,857.44 crore on a net basis on Wednesday, according to exchange data.