The Indian Rupee has gained for five consecutive sessions against the US Dollar, closing at 86.57. This streak is the longest in six months, driven by Dollar weakness amid foreign disinvestment and a drop in India’s trade deficit. Both crude oil prices and banking liquidity issues remain points of concern as market dynamics evolve.
The Indian Rupee has recorded its longest winning streak in six months, closing stronger against the US Dollar for five consecutive sessions. On Tuesday, the Rupee advanced 23 paise, ending at 86.57, marking a significant change from its previous close of 86.80. This rise represents the Rupee’s first series of gains since September, with a cumulative increase of 1.08 percent in March after five months of declines.
Despite the Rupee’s strength, foreign portfolio investors are still selling aggressively, having offloaded Rs 1.43 trillion this year, including Rs 4,488 crore on Monday alone. The Dollar index, a metric for the Dollar’s strength against other currencies, decreased by 0.04 percent to 103.32 and has fallen more than 3.6 percent this month, the largest drop since November 2022.
India’s merchandise trade deficit has significantly shrunk to $14.05 billion in February, its lowest in three-and-a-half years, due to reduced exports and imports amidst decreasing global petroleum prices and economic uncertainty.
Crude oil prices have risen for three consecutive days, with Brent crude up by 1.45 percent to $72.10 per barrel and WTI crude up by 1.55 percent to $68.63 per barrel, driven by rising tensions in the Middle East.
A liquidity shortfall of about Rs 2 trillion was noted in the banking system as of March 16, suggesting potential pressure on the Reserve Bank of India to manage liquidity and bolster forex reserves. Despite this, Indian stock indices, including Nifty and Sensex, rose over 1 percent on Tuesday due to positive global sentiment and significant domestic institutional investment.
The Indian Rupee has successfully strengthened against the Dollar, achieving its longest winning streak in six months despite ongoing foreign investor sell-offs and liquidity challenges within the banking system. Meanwhile, decreasing trade deficits and rising crude prices indicate complex economic dynamics at play. Overall, while the Rupee shows resilience, fluctuating global influences and local economic factors continue to shape its trajectory.
Original Source: www.business-standard.com
