Rupee closes below 88 mark after rebounding three week high against US dollar

The Indian rupee closed at Rs 87.82 against the US dollar on Wednesday’s session. It recorded the day’s range between Rs 87.72 and Rs 87.92.

Earlier today, the rupee opened stronger, up 23 paise from the previous session close and recorded its best start, below the 88 mark for the first time in the past two weeks. 

The rupee reached a 3-week high against the US dollar, recovering for the third consecutive day. It gained 75 paise from its record low of 84.49 per dollar, hit on September 11.

Analysts have said that the rupee is likely to face resistance around 88.20. Despite support from bilateral trade talks, a decisive break below 87.90 could open the way toward 87.50 or to 87.20, they said.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was observed trading at 96.73, higher by 0.11 per cent. 

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Key factors of rupee recovery:

1) Emerging market currencies, including the rupee, have gained support as reports suggest that the US economy is on the verge of recession.

2) The dollar index has dropped below 96, hitting its lowest level since February 2022. This has supported the rupee’s recovery.

3) The Indian market is at a 2-month high. Foreign Institutional Investors (FIIs) have reduced their selling pace, while Domestic Institutional Investors (DIIs) have bought strongly for the 16th consecutive day.

4) Expectation of a 0.25 per cent cut in US interest rates has weakened the US dollar globally.

5) The Indian market is at a 2-month high; FIIs reduced their selling pace, and DIIs have bought strongly for the 16th consecutive day.

The US Federal Reserve’s comments on the economy and monetary policy, developments in India-US trade discussions, performance of the Indian equity market, actions of foreign institutional investors, RBI’s future actions and the dollar index movement are expected to likely affect the recovery of the rupee, and global softening of the US dollar.