Indian Rupee opens stronger, trades below 87 mark as dollar extends fall

The Rupee extends its gains to over 0.7 per cent in March after seeing five consecutive months of decline

The Indian rupee opened stronger on Monday and traded below the 87 mark against the US dollar, the American currency continued to weaken amidst the reviving domestic economy.

 

The local unit opened nine paise stronger at 86.91 against the US dollar after closing at the 87 mark on Thursday, according to Bloomberg data. The Rupee extended its gains to over 0.7 per cent in March, thus far, after seeing five consecutive months of decline. 

 

The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 0.03 per cent, extending the monthly fall to over 3.6 per cent, the highest since November 2022.

 

Crude oil prices extended gains for the second day as China said it would take steps to revive consumption by boosting incomes. Brent crude oil was up 0.58 per cent to $70.99 per barrel, while WTI crude was up 0.64 per cent at 67.65 per barrel as of 8:55 AM IST. 

 

A sharper-than-expected drop in India’s inflation to 3.61 per cent, coupled with a "stellar" 5 per cent surge in industrial production, reinforced investor confidence in the rupee, according to Amit Pabari, managing director at CR Forex Advisors. With dovish Fed expectations keeping the dollar under pressure, the rupee could extend its gains in the near term, he said. “However, global risk sentiment and oil price movements will play a crucial role in determining the next leg of the rupee’s trajectory.“

 

 

  “Given the current sentiment, the USD/INR pair is expected to trade within the 86.80-87.40 range in the near to medium term,” Pabari said. A breakout beyond this band could trigger an additional move of 30-50 paise in the same direction, keeping market participants on high alert for potential volatility, he said.

 

Meanwhile, India's Forex reserves recorded their strongest increase in more than 3 years by $15.37 billion to reach $653.97 billion for the week ending 7th March. This was a result of the $ 10 billion swap conducted by RBI along with higher revaluation of other global currencies, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.  

 

The domestic currency has been steadily gaining in the past few days though dollar dips get bought keeping the rupee in a range of 86.80 to 87.50 in the past few days, Bhansali said. “Today the opening could be higher at 86.94 as equities open slightly higher and Asian currencies continue to remain on the stronger side.” 

 

  Meanwhile, all eyes will be on Jerome Powell this week as he faces the tricky task of assuring investors the economy remains on solid footing while also conveying policymakers stand ready to step in if necessary. The Fed is widely expected to leave interest rates steady when they meet March 18-19, but traders now see high odds of three rate cuts this year, most likely beginning in June, according to Bloomberg.