Mumbai: On Monday, the Indian rupee was trading at 94.75 against the US dollar. The active intervention of the Reserve Bank of India (RBI) strengthened the rupee despite high crude oil prices and capital withdrawal pressures.
Day Trading and the Role of RBI
The rupee started the day at 94.89, up 8 paise from its previous closing price of 94.97. According to experts, the rupee remains around 95 per dollar. This could be the RBI’s ‘soft defence line’, where the central bank is constantly trying to stem the fall of the rupee by selling dollars. Last week, the rupee had its best weekly performance in nearly four years due to RBI’s support and spot market intervention.
Decline in FIIs Selling
Foreign Institutional Investors (FIIs) sold Rs 54,636 crore till October 16, which is higher than September. However, in the last few days they slowed down and became minor buyers on October 16. Experts pointed out that there has been a temporary change in the stance of FIIs as the US 10-year yield declined from 5.3 per cent to 5.08 per cent and the rupee strengthened below 95 per cent.
This is not a major structural change, but a strategic move. FIIs continued to sell in the financial and oil sectors, but made purchases in companies such as digital platforms, entertainment, restaurants, and healthcare. The Nifty rose 2.77 per cent during the week to cover some short positions, which strengthened banking stocks.
Relief in Crude Oil Prices
On Friday, Brent crude crossed $ 110 a barrel for the first time since May. On Monday, it fell more than one percent to around $108. The decline came after US President Donald Trump lifted new sanctions on Iran and tariffs on Russian goods, which is likely to boost fuel exports from Iran.
[DD news]