Rupee gains on soft dollar, easing West Asia tensions; opens at 85.92/$

Indian Rupee today: The domestic currency opened 17 paise higher at 85.92, a day after closing at 86.09 against the dollar

The Indian Rupee opened higher on Thursday, as the softening dollar aided the currency along with the easing West Asia tensions. 

 

The domestic currency opened 17 paise higher at 85.92, a day after closing at 86.09 against the dollar, according to Bloomberg. The unit has depreciated by 0.38 per cent so far this month, among the worst-performing ones in Asia. 

 

On Tuesday, dollar demand emerged around the 85.80 level from oil companies and foreign portfolio investors (FPIs), who were net sellers in equities, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. 

 

However, with the US dollar index softening and the euro strengthening, the rupee is expected to open stronger today at around 86.01, Bhansali said. "The intraday range is likely to be between 85.75 and 86.25." 

 

The HDB Financial Services initial public offering saw modest interest, with a 37 per cent subscription as of Tuesday evening, according to BSE data. Subscription levels are expected to pick up over the next two days, potentially leading to higher foreign inflows in the USD/INR pair, Bhansali noted. 

 

Economic activity is holding firm in India amid a challenging global environment, and financial conditions remained conducive to facilitating an efficient transmission of interest rate cuts to the credit market, Reserve Bank of India officials said in a report on the ‘State of the Economy’ in its monthly bulletin.

 

The RBI's bulletin showed a decline in its short dollar position to $73 billion, with outstanding positions of up to three months falling to \$15 billion, experts noted. "This provides the central bank with greater flexibility to intervene in the event of pressure on the rupee," Bhansali said. The Real Effective Exchange Rate (REER) for May stood at a relatively comfortable 101.08, indicating a slightly overvalued rupee, he added. 

 

Meanwhile, the US dollar weakened after US President Donald Trump said he was considering an early appointment for the next Federal Reserve chairman. The US dollar index, which measures the greenback against a basket of six major currencies, was down 0.33 per cent at 97.35.

 

Coming to the West Asia conflict, Trump said the war between Israel and Iran is over, but later warned that new fighting could start soon. Trump added that the US would hold a meeting with Iran next week. Brent crude price was up 0.30 per cent at $67.88 per barrel, while WTI crude prices were higher by 0.40 per cent at 65.18, as of 9:05 AM IST.