Indian Rupee opens strong at 86.76/$ despite persistent FPI selling

Indian Rupee opened firm against the US Dollar on Tuesday even as foreign portfolio investors continued their selling spree amid rising dollar and crude prices.  

 

The local unit opened 4 paise stronger at 86.76 against the US dollar after closing at 86.80 on Monday, according to Bloomberg data. The Rupee extends its gains to over 0.87 per cent in March after seeing five consecutive months of decline. 

 

The Reserve Bank of India (RBI) was a major dollar buyer yesterday, keeping the currency well within a range, while foreign Banks were major sellers, according to Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.  Global funds have offloaded Rs 1.43 trillion so far this year, including Rs 4,488 crore on Monday, as per NSE data. Bhansali noted that the Rupee is expected to face resistance at 86.60, with importers actively purchasing dollars while exporters remain cautious.

 

 

The dollar index — a measure of the value of the US dollar relative to a basket of foreign currencies — was down 0.18 per cent. The index is down over 3.6 per cent, the highest since November 2022.  

 

India’s merchandise trade deficit plummeted to a three-and-a-half-year low of $14.05 billion in February, as exports and imports saw a sharp contraction due to softening global petroleum prices and rising economic uncertainty. 

 

From a technical perspective, a head-and-shoulders pattern has formed, Amit Pabari, managing director, Amit Pabari. "A break below 86.80 could trigger strong momentum, potentially leading to a decline of 70-80 paisa. This could push the price toward 86.50 and further down to 86.20 in the near term, while 87.00 will act as a strong resistance."

 

Crude oil prices advanced for the third straight day amid escalating tensions in the Middle East. Brent crude oil was up 0.28 per cent to $71.27 per barrel, while WTI crude was up 0.25 per cent at 67.75 per barrel as of 9:00 AM IST. 

 

The banking system continues to face a liquidity shortfall, with the deficit standing at approximately Rs 2 trillion as of March 16, according to Pabari. “This shortfall is likely to force the Reserve Bank of India to absorb a significant portion of the inflows to manage liquidity and rebuild forex reserves.“

 

Meanwhile, Stocks in the Asia Pacific region advanced on Tuesday taking overnight cues from a second-day rally on Wall Street. The S&P 500 index and Nasdaq 100 rose by 0.64% and 0.31%, respectively, as of Monday. The Dow Jones Industrial Average advanced by 0.85%.