The Indian rupee strengthened to 82.40 per US dollar on Thursday, its best level in six months, as a combination of strong foreign institutional investor inflows into Indian equities and a globally weakening dollar provided tailwinds for the domestic currency. The rupee gained 68 paise during the session, one of its sharpest single-day appreciations in over a year.
FIIs have net purchased over Rs 42,000 crore worth of Indian equities in May alone, necessitating significant dollar sales in the forex market. The weakening of the US dollar index, which fell to 99.8 following softer US jobs data, provided additional momentum for emerging market currencies including the rupee. The RBI was seen intervening minimally, allowing the market to find its natural level.
A stronger rupee benefits Indian importers, particularly oil marketing companies and electronics manufacturers who import components. However, it poses a headwind for export-oriented sectors like IT services, pharmaceuticals and textiles where revenues are largely dollar-denominated. Analysts expect the rupee to trade in the 82-84 range over the next quarter, with the RBI likely buying dollars at lower levels to rebuild reserves and prevent excessive appreciation that could hurt export competitiveness.
