Rupee snaps 5-day losing streak as lower crude, RBI inflows lift sentiment | Finance News

The rupee snapped a five-session losing streak on Tuesday, aided by easing crude oil prices and stronger-than-expected foreign exchange inflows under the Reserve Bank of India’s (RBI’s) recent measures to shore up the country’s foreign exchange reserves.

 

The domestic currency settled at 96.24 per US dollar against the previous close of 96.45 per dollar, after touching an intraday high of 96.13 per dollar. Despite the recovery, the rupee remains down over 10 per cent from a year ago and is the worst-performing major Asian currency over the period.

 

Market participants said the decline in crude oil prices after reports of diplomatic efforts between the US and Iran improved sentiment, while intermittent dollar sales by the RBI capped losses. Demand for the greenback from oil marketing companies and other importers, however, continued to keep appreciation in check.

 
 

“The main reason behind the rupee’s appreciation was the fall in crude oil prices and the RBI’s intervention in the morning,” said a dealer at a state-owned bank.

 

Supporting sentiment, the RBI on Tuesday said its measures announced in June to attract foreign capital had mobilised $20.72 billion between June 8 and July 17. The update marked the first official disclosure on inflows under the package, which included a concessional swap window for FCNR(B) deposits and external commercial borrowings, relaxation in reserve requirements, and tax exemptions on select foreign investments in government securities. Of the total inflows, $17.4 billion came through FCNR(B) deposits.

 

The reported inflows were higher than market expectations. Market participants said collections are likely to accelerate in August and September.

 

Market participants will now watch whether the RBI uses the additional foreign exchange buffers to step up intervention as the rupee trades near record lows. The local currency hit a record closing low of 96.83 per dollar on May 20 this year.

 

“Encouraging FCNR(B) flow data released by the RBI boosted sentiment and drove rupee appreciation. Better-than-expected capital inflows, combined with steady crude prices and a stable dollar, offered much-needed support to the currency. Technically, the rupee is trading with key support at 95.80 per dollar and resistance at 96.50 per dollar,” said Dilip Parmar, senior research analyst, HDFC Securities.

 

Asian currencies traded in a narrow range on Tuesday as investors monitored developments in West Asia and awaited earnings from major US technology companies for cues on global risk sentiment. The rupee, which has depreciated 1.64 per cent in July, is the worst-performing Asian currency after the Taiwan dollar.

 

The foreign inflows also provide comfort on the balance of payments front, which has been in deficit for the last two financial years.

 

“The current account position in Q1 FY27 appears quite manageable, with the first two months of the current account in a small surplus, and Q1 FY27 is estimated at around $7 billion as per our latest estimates,” BoFA Securities said in a note.

 

“While foreign reserves have been declining recently, we see this more as a valuation loss due to falling gold prices, and generally see the balance of payments ending in a small surplus,” the note said.