The rupee opened at 95.13 per dollar, compared with Wednesday’s (August 5’s) close of 95.12 per dollar, a marginal weakening of 1 paisa.
The currency had strengthened past the 95-per-dollar mark for the first time in a month during Wednesday’s (August 5’s) session, but faced resistance as demand for dollars from importers and speculative players emerged at higher levels.
The rupee briefly slipped to around 95.25 per dollar during the session before recovering. Despite the volatility, the currency has gained around 1.7% from its recent lows, indicating a recovery trend.
Dollar weakness provides support
The rupee’s recovery comes as the US dollar remains under pressure. The dollar index slipped to 99.64, with traders reducing expectations of a Federal Reserve rate hike next month.
Lower-than-expected US private employment data and a decline in oil prices have led markets to scale back expectations of tighter monetary policy. The probability of a September Fed rate hike has fallen to around 55% from nearly 70% at the start of the week, according to market estimates.
A weaker dollar generally supports emerging market currencies, including the rupee, as it reduces pressure on foreign currency outflows and makes dollar-denominated imports relatively cheaper.
Crude oil remains a key factor
Oil prices continue to influence the rupee’s movement as India is one of the world’s largest crude oil importers. Brent crude futures declined to $79.04 per barrel before recovering slightly to around $79.68 per barrel.
Market participants are also tracking developments around US-Iran talks. Expectations of progress in negotiations have weighed on oil prices, as a potential easing of geopolitical tensions could improve global supply outlook.
Currency traders said the rupee’s move above the 95-per-dollar level could face resistance, but the limited correction after crossing the mark suggests that the broader trend remains positive.
Going ahead, movements in crude oil prices, global dollar trends and developments around US monetary policy are likely to remain key drivers for the rupee.
-With Reuters inputs
