The Indian rupee declined 21 paise to 88.40 against the US dollar in early trading, pressured by month-end dollar demand from importers and rising global crude oil prices. The currency opened at 88.34 before slipping further, following a 36 paise drop to 88.19 in the previous session.

Market Factors

• The dollar index fell 0.12% to 98.66
• Brent crude rose marginally to $65.63 per barrel
• Markets are closely watching the Federal Reserve's policy decision
  • 97.8% probability assigned to a 25-basis-point rate cut

Domestic Market Performance

• Sensex gained 125.93 points to 84,904.77
• Nifty up 39.8 points to 26,005.85
• Foreign Institutional Investors sold equities worth Rs 55.58 crore in the previous session

Oil Imports

India's crude oil imports from the US reached 540,000 barrels per day in October, the highest since 2022, as part of efforts to diversify supply sources.

Recent Rupee Performance

In a separate trading session, the rupee experienced its largest single-day decline since September 23:

• Fell 40 paise to close at ₹88.24/$1
• Traded in a range of ₹87.85 - ₹88.30/$1

Influencing Factors

1. US-India Trade Deal: Initial gains due to potential reduced tariffs on India, later offset by dollar buying pressure
2. RBI Intervention: Described as mild compared to strong intervention in the previous week
3. Market Sentiment: Participants closely monitoring US-India trade deal developments

Outlook

Currency analysts expect the rupee to trade within a range of ₹87.80 to ₹88.30 against the dollar, with ₹88.30 seen as a key resistance point for the dollar.

Conclusion

The sharp fluctuations in the rupee's value underscore its vulnerability to both domestic and international factors. While trade deal speculations offered initial support, the subsequent weakening highlights the complex interplay of forces in the forex market. Investors and businesses engaged in international trade may need to closely monitor these developments, as they could have implications for import costs, export competitiveness, and overall economic stability.

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.