The Indian rupee saw a sharp rebound against the US dollar on Wednesday, climbing from its all-time closing low. This rally was primarily driven by a softer dollar index amid growing expectations of US Federal Reserve rate cuts. Additionally, reports of proactive intervention by the Reserve Bank of India (RBI) and a drop in crude oil prices helped the rupee hit its highest level in nearly a month.
The rupee opened at 88.74 against the US dollar and gained momentum throughout the session, reaching 87.93 for the first time since mid-September, marking an 88 paise improvement from the previous close. It last traded around 88.3250, up 0.5 per cent from Tuesday’s close of 88.81, which was an all-time low. The dollar index, which measures the greenback’s strength against six major currencies, fell 0.20 per cent to 98.85, further supporting the rupee’s recovery.
Factors Behind the Rupee’s Strength
The US dollar weakened after Federal Reserve Chair Jerome Powell signalled the likelihood of more rate cuts this year, citing rising unemployment and persistent inflation concerns. This dovish tone lifted Asian currencies and equity markets, despite ongoing worries about US-China trade tensions.
At the same time, the RBI actively intervened to ease pressure on the rupee by initiating early morning dollar sales through state-run banks, as shared by multiple traders. The decline in crude oil prices also provided relief; Brent crude fell 0.37 per cent to $62.16 per barrel, while US West Texas Intermediate crude futures dropped 0.29 per cent to $58.54.
Market Outlook
Indian stock indices, including the Sensex and Nifty 50, rallied by over half a per cent, bolstering positive investor sentiment and supporting the rupee’s gains.
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