Indian Rupee Strengthens Against Dollar Amid RBI Intervention Despite High Oil Prices

New Delhi, October 19 (Daily Kiran) : The Indian rupee appreciated by 22 paise against the US dollar, trading at 94.75 on Monday. This increase comes despite persistent pressure from high crude oil prices, thanks to the Reserve Bank of India’s (RBI) intervention in the foreign exchange market.

Earlier in the day, the rupee opened stronger at 94.89, up from its previous closing level of 94.97. Market analysts suggest that the rupee is currently hovering around the 95 per dollar mark, which is viewed as a “soft defense line” by the RBI. They note that the central bank’s ongoing dollar sales are helping to prevent a significant depreciation of the rupee.

Last week, the rupee achieved its best weekly performance in nearly four years, bolstered by support from the central bank and interventions in the spot market. The RBI has ramped up its activity in the foreign exchange market to support the rupee, which faces ongoing challenges from high crude oil prices and capital outflows.

Experts report that foreign institutional investors (FIIs) have sold off a total of ₹54,636 crore by October 16, surpassing the total sales for the entire month of September. However, the pace of FII selling has slowed in recent days, with some minor net buying observed on October 16.

Analysts attribute the recent stabilization of the rupee, which is now below 95 per dollar, to a drop in the US 10-year bond yield from over 5.3% to 5.08%. This shift has prompted a temporary change in FII sentiment, although it appears more tactical than structural at this stage.

FIIs continue to offload shares in financial and oil sectors while showing interest in consumer service companies, including digital platforms, entertainment, restaurants, and healthcare.

The Nifty index saw a robust increase of 2.77% last week, prompting some short covering from FIIs, which bolstered banking stocks that had been under significant selling pressure from foreign investors.

Meanwhile, crude oil prices remain a significant concern for the market. On Friday, Brent crude surpassed $110 per barrel for the first time since May, but saw a decline of over 1% on Monday, trading around $108 per barrel. Analysts believe this drop is linked to new sanctions on Russia and proposed tariff exemptions on Russian products, which may lead to an increase in global supply of Russian fuel.