Rupee rebounds 8 paise to close at 86.62; remains under pressure on elevated crude prices

The rupee managed to recover from its historic low on January 14, closing 8 paise higher at 86.62 against the US dollar. The recovery came on the back of a weaker greenback and some bounce back in domestic equity markets following the release of macroeconomic data.

Rupee recovers, but pressure persists

At the interbank foreign exchange market, the rupee opened at 86.57 and touched an intra-day high of 86.45 before settling at 86.62. This marked a rebound from Monday’s record low of 86.70, which was its steepest single-day fall in nearly two years, down 66 paise.

The rupee has faced continued weakness in recent weeks, depreciating over Re 1 since December 30, 2024, as it contends with elevated crude oil prices and sustained foreign fund outflows.

Market cues: Inflation and crude prices weigh

Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, attributed the recovery to easing retail inflation and a weaker US dollar. Retail inflation declined to a four-month low of 5.22 per cent in December, while wholesale price inflation rose to 2.37 per cent. Despite these positive signs, elevated crude oil prices continue to pose inflationary risks, limiting room for sustained rupee appreciation.

The dollar index, which measures the greenback’s strength against six major currencies, fell 0.39 per cent to 109.38. Brent crude futures traded higher by 0.10 per cent at USD 81.09 per barrel, adding to concerns over India’s trade deficit.

Domestic markets support recovery

The recovery in the rupee was also supported by gains in domestic equity markets. The BSE Sensex ended 169.62 points higher at 76,499.63, while the Nifty rose 90.10 points to close at 23,176.05. However, foreign institutional investors (FIIs) continued their selling spree, offloading Rs 4,892.84 crore worth of equities on Monday.

Outlook: Limited relief ahead

Choudhary predicts the USD-INR spot price to trade in a range of Rs 86.40 to Rs 86.85, with upcoming US PPI and CPI data likely to influence movements. Persistent crude oil prices and inflationary pressures suggest the rupee could remain under pressure in the near term.

(With inputs from agencies)