The Indian rupee demonstrated significant strength in early trading, opening at 87.84 against the US dollar and subsequently touching 87.81, marking a gain of 28 paise from its previous close of 88.09. This surge propelled the rupee to its highest level since August 29, buoyed by a combination of factors including a weakening dollar and declining US Treasury yields.

Dollar Index Hits Three-Month Low

The dollar index, a key indicator of the greenback's strength against a basket of major currencies, slipped to a three-month low before recovering slightly to 96.73. This weakness in the dollar has provided substantial support to emerging market currencies, including the Indian rupee.

Oil Prices Offer Additional Support

Adding to the rupee's positive momentum, Brent crude futures saw a modest decline of 0.20%, settling at $68.33 per barrel. Lower oil prices typically benefit the rupee, as India is a major oil importer, and reduced crude costs can lead to lower import bills and improved trade balances.

Market Anticipation Builds for FOMC Meeting

Investors and currency traders are closely watching the upcoming Federal Open Market Committee (FOMC) meeting. Market consensus points towards a 25-basis-point rate cut, a move that could have significant implications for currency markets globally.

Rupee's Technical Outlook

Analysts are optimistic about the rupee's near-term prospects, identifying key levels to watch:

If the rupee breaks decisively below 87.90, it could potentially move towards 87.50 and even 87.20.

This technical outlook suggests room for further appreciation, contingent on the rupee's ability to breach key levels.

The combination of a weaker dollar, lower oil prices, and anticipation of the FOMC meeting has created a favorable environment for the Indian rupee. As global economic dynamics continue to evolve, market participants will be keenly observing how these factors play out and impact currency movements in the coming days.

The Indian rupee strengthened for the third consecutive day, closing at 88.0525 per dollar compared to the previous close of 88.21. The 16 paise gain was driven by broader dollar weakness ahead of the US Federal Reserve's two-day policy meeting, with markets expecting a 25-basis point rate cut.

Dollar Weakness and Market Expectations

The dollar index fell below 97 during Asian trade, reaching multi-month lows against major currencies. This weakness in the US currency has contributed to the rupee's strengthening. Investors are closely watching the Federal Reserve's policy meeting, anticipating a potential rate cut that could further impact currency markets.

Domestic and Regional Factors

Positive local equity markets and gains in Asian currencies supported the rupee's performance. The ongoing US-India trade talks have also raised hopes for progress on resolving tariff disputes, potentially benefiting the rupee.

Recent Rupee Performance

Despite recent gains, the rupee hit a record low of 88.4425 per dollar recently and continues to underperform regional peers due to ongoing US trade tensions. Currency dealers are monitoring the offshore Chinese yuan, which has been strengthening as Beijing allows more market influence on its value.

Trade Talks and Future Outlook

The commencement of US-India trade talks in New Delhi is a focal point for investors. American negotiator Brendan Lynch is scheduled to meet with Indian officials for day-long discussions on the bilateral trade deal. These talks mark the sixth round of negotiations between the two nations, with previous discussions having been postponed following the imposition of 50% US tariffs on Indian goods.

Market Indicators

• The dollar index was trading at 97.22, down 0.08%.
• Brent crude oil prices saw a modest increase of 0.25%, reaching $67.61 per barrel.

Domestic Equity Markets

Indian stock markets showed positive momentum:

Foreign Institutional Investors

Foreign Institutional Investors (FIIs) continued their selling streak, offloading equities worth ₹1,268.59 crore.

As the US-India trade negotiations unfold, market participants will be closely monitoring any developments that could influence the rupee's trajectory and broader economic relations between the two countries.