The rupee strengthened by 14 paise to 96.28 from the dollar in the early session amid positive sentiments prevailing in the domestic forex market. The rupee gained due to positive investor sentiments, falling prices of crude oil, and consistent inflows of foreign funds, which enabled the domestic currency to move up in the early session.
Rupee’s gains were credited to various reasons both domestic and international. A weaker dollar against a basket of currencies and positive sentiments in the Asian equity markets resulted in strong demand for emerging market currencies like the rupee. Furthermore, stable macroeconomic fundamentals and economic growth prospects kept the investors’ sentiments towards the country intact.
According to currency experts, global crude oil prices play an important role in determining rupee performance. As India is one of the biggest importers of crude oil and since India is heavily dependent on its imports for meeting its requirements, a fall in crude oil prices helps ease out the burden on India’s current account deficit.
Equity performance in the domestic market is also another factor which determines the currency trend. Positive trends in the index performance and involvement of foreign institutional investors (FIIs) can help boost the rupee. But according to experts, changes in global market volatility, geopolitical events and the monetary policies followed by central banks can play an influential role in future rupee movements.
Even though there was a gain in rupee performance during the day, analysts expect it to trade in a range because of the anticipation of major economic releases such as inflation numbers and interest rates of the United States Federal Reserve Bank. These factors will be monitored for their possible influence on foreign investment and rupee performance.
Strong rupee helps the import-based industries because of lower cost of inputs while exporters might face some difficulties with profits due to lack of currency gains. As economic condition of the world is changing, market players will continue to monitor domestic factors and foreign news for further rupee trend.
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