Indian Rupee Shows Resilience Amidst Volatility, rises 39 paise to ₹84.18

The Indian Rupee opened trading on Monday with a notable gain against the US dollar, reflecting improved market sentiment. The domestic currency reportedly rose 39 paise in early trade, reaching ₹84.18 against the greenback. This upward movement follows a week marked by volatility, suggesting that the Rupee is currently benefiting from specific market dynamics.

Recent Exchange Rate Movements

Monday's gain saw the Rupee at an early high of ₹84.18 against the US dollar. This represents a gain of 39 paise over its previous close. On Friday, the currency had experienced significant volatility, initially hitting a seven-month high and crossing the ₹84 per dollar mark, but ultimately paring all gains to settle 3 paise lower at ₹84.57 against the greenback. 

Drivers of Rupee Volatility and Strength

The past week saw heightened volatility for the Indian Rupee. This volatility was driven by a confluence of factors, including shifting market positions, steady capital inflows, and evolving actions by the Reserve Bank of India (RBI) in the foreign exchange space.

Fundamental support for the Rupee has reportedly come from robust equity inflows. These inflows totalled ₹2,769.81 crore, reflecting continued foreign investor interest in Indian assets. Additionally, the recent issuance of a new 10-year government bond, carrying a 6.33% coupon, garnered strong demand and aligned with expectations. With the benchmark 10-year yield stable at 6.36%, this positive reception could attract further foreign inflows, potentially reinforcing near-term Rupee strength.

Global Headwinds and Tailwinds

Global oil prices are also playing a significant role. Brent crude oil prices slumped nearly 4 percent in morning Asian trade on Monday, falling 3.69 percent to $59.02 per barrel in futures trade. This sharp decline came after OPEC+ signalled plans to further increase production in the coming months. The announcement of a second straight monthly output hike for June, adding 411,000 barrels per day to global supply, coupled with the decline in crude prices, could ease India's oil import bill and potentially support the Rupee further.

Meanwhile, the US dollar index, which measures the dollar's strength against a basket of six currencies, was struggling slightly below the 100 level, trading lower by 0.26 per cent at 99.76. Concerns about a US recession have reportedly eased somewhat following solid March payroll data, which is seen as delaying the odds of a June rate cut by the Federal Reserve.

Adding to the positive picture for India's external position, the country's forex reserves saw a significant increase for the eighth consecutive week, rising $1.983 billion to $688.129 billion during the week ended April 25.

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