The Indian rupee has demonstrated its strongest weekly performance in nearly four months, bolstered by the Reserve Bank of India's (RBI) aggressive dollar sales and geopolitical developments. This surge comes amidst a complex backdrop of international relations and domestic monetary policy decisions.

RBI's Intervention and Currency Performance

The Reserve Bank of India has been actively supporting the rupee through substantial dollar sales, which have played a crucial role in the currency's recent strength. This intervention highlights the central bank's commitment to maintaining stability in the foreign exchange market.

Geopolitical Factors

Adding to the rupee's momentum were comments from U.S. President Donald Trump regarding India's stance on Russian crude oil imports. Trump stated that Prime Minister Narendra Modi had promised to halt these imports, although it's important to note that the Indian government has not officially confirmed this pledge.

Trade Tensions

The ongoing purchase of discounted Russian crude by India has been a point of contention with Washington, resulting in significant economic repercussions:

Bond Market Developments

The Indian bond market also saw notable movements:

Monetary Policy Outlook

Recent commentary from rate-setting panel members has been dovish, indicating potential for future rate cuts:

• Improving inflation outlook creates room for growth-supportive policies
• RBI Governor Sanjay Malhotra noted declining inflation projections
• Market expectations:
  • Rate cut in December
  • Possible additional cut in February
  • Potential repo rate target: 5.00%

This combination of currency strength, geopolitical developments, and a dovish monetary policy outlook presents a complex picture for the Indian economy. Investors and market participants will be closely watching how these factors evolve and impact India's financial landscape in the coming months.

The Indian rupee has reversed its recent gains, closing at 88.03 against the US dollar. This represents a decline of 7 paise from the previous close, despite opening stronger at 87.91 and touching an intraday high of 87.75. The currency's weakening can be attributed to several factors, including trade tensions and global uncertainties.

Key Factors Affecting Rupee's Performance

1. Trade Tensions: Ongoing global trade uncertainties have weighed on the rupee.

2. Foreign Fund Inflows: Despite the overall decline, foreign fund inflows provided some support to the currency.

3. Crude Oil Prices: Lower crude oil prices offered some cushion to the rupee's fall.

4. Dollar Index: The dollar index traded 0.11% lower at 98.22, which typically would support the rupee but was offset by other factors.

Domestic Equity Markets

Despite the rupee's decline, domestic equity markets showed positive performance:

Foreign Institutional Investors (FIIs) purchased equities worth Rs 997.29 crore, indicating continued interest in Indian markets.

Global Oil Market

Brent crude traded 1.10% lower at $60.39 per barrel, which typically benefits oil-importing countries like India.

India's Energy Policy

In response to US President Trump's claim that Prime Minister Modi assured him India would stop procuring Russian crude oil, India's External Affairs Ministry spokesperson stated:

• He was not aware of such a phone conversation.
• India's energy policy focuses on stable prices and secure supplies.
• The country is diversifying its energy sourcing to meet market conditions.

The rupee's recent performance demonstrates the complex interplay of domestic and international factors affecting currency markets. While there were some supportive elements like equity market gains and foreign inflows, trade tensions and global uncertainties ultimately led to the rupee's depreciation.

Investors and businesses engaged in international trade should continue to monitor these developments closely, as currency fluctuations can significantly impact their operations and financial planning.