NEW DELHI: Rupee extended its gains for a second straight session on Monday, moving below the 94-per-dollar mark. The rally was supported by softer crude oil prices, stronger foreign fund inflows and hopes of easing tensions in the Middle East.The currency rose 24 paise to 93.74 against the US dollar in early trade. It opened at around 93.85 in the interbank forex market before gaining further. Rupee had already made a strong recovery on Friday, rising 43 paise to close at 93.98 against the greenback.Forex traders said rupee could maintain its positive momentum if diplomatic efforts in the Middle East make progress. Any easing of tensions could reduce the risk premium in crude oil prices, providing further support to the currency.These hopes gained ground over the weekend after US President Donald Trump indicated that further military strikes against Iran were highly unlikely if negotiations progressed and both sides reached a strong agreement.
Crude oil prices cool as hopes of peace grow
The easing in crude oil prices has been one of the key factors supporting rupee. Brent crude, which had earlier climbed to around $117.64, has now slipped below $100 and is trading near $98. Amit Pabari, managing director of CR Forex Advisors, said improving diplomatic expectations were already having an impact on energy prices.“The improvement in diplomatic expectations is already reflecting in energy prices. Brent crude, which had climbed to around $117.64, has now slipped below $100 and is trading near $98. For currency markets, even the possibility of a lasting agreement is important,” Pabari said.Brent crude, the global oil benchmark, was trading 0.15% lower at $98.17 per barrel in futures trade. The dollar index, which measures the greenback’s strength against a basket of six currencies, was also down 0.12% at 102.18.
Foreign fund inflows add to rupee’s support
Foreign investment activity provided another source of support for the domestic currency. Foreign institutional investors (FIIs) purchased equities worth Rs 13,749.82 crore on Friday, according to exchange data.The combination of lower crude prices and stronger foreign fund inflows has supported the rupee’s recent gains against the dollar.With rupee now below the 94-per-dollar level, Pabari sees further room for appreciation. He expects the currency to move towards 93.50 and 93.00, while identifying 94.40–94.50 as the immediate resistance zone.“With USD/INR breaking below the 94.00 mark, the probability of further rupee appreciation towards 93.50 and 93.00 has increased. On the upside, 94.40–94.50 is likely to act as the immediate resistance zone,” Pabari said.Meanwhile, domestic equity markets opened lower on Monday. BSE Sensex fell 93.95 points to 80,919.19, while NSE Nifty declined 30 points to 24,968.80.Separately, the Reserve Bank of India (RBI) reported that India’s foreign exchange reserves declined by $2.691 billion to $717.056 billion in the week ended October 30.