Rupee logs strongest weekly gain in over two years, ends at 86 against dollar

Rupee had a stellar run on Friday, posting its best day against the US dollar in over a month, thanks to fresh foreign inflows and traders cutting their long-dollar bets. The currency also logged its strongest weekly performance in more than two years. 

Extending its winning streak for the sixth consecutive session, the rupee appreciated by 36 paise to close at 86 per dollar. The strong rally was fueled by a surge in domestic equity markets and renewed foreign capital inflows.  

At the interbank foreign exchange market, the rupee opened at 86.26, hit an intraday high of 85.93, and a low of 86.30 before settling at 86 against the dollar. Compared to its previous close of 86.36, this marked a notable gain of 36 paise.

Meanwhile, the global oil benchmark, Brent crude, down 0.29 percent to 71.79 dollars per barrel in futures trading, while the dollar index, which measures the strength of the US dollar against a basket of six currencies, was up 0.19 percent at 104.04.

Also Read: Final Trade: Sensex jumps 557 pts, Nifty reclaims 23,350; oil & gas lead, metals lag

What’s driving the rupee’s rally?

Jateen Trivedi, VP Research Analyst at LKP Securities, attributed the rupee's strength to increased foreign institutional investor (FII) inflows and a softer US dollar. "Rupee strengthened further with a sharp rise of 40 paise or 0.46 per cent at 85.94, as FII inflows surged with strong buying figures in recent days. The Fed's decision to hold rates steady and its forecast for lower interest rates ahead pulled the dollar down, providing significant support to the rupee. but major Capital market strengthening gives rupee the strong push higher,"

Looking ahead, Trivedi expects the rupee to trade in a range of 85.65 to 86.30, with its movement hinging on global risk sentiment and market flows.  

Also Read: Currency Market News: Rupee climbs 17 paise to 86.19 against dollar in early trade

Vinod Nair, Head of Research at Geojit Financial Services, noted that the domestic stock market's strong recovery played a key role in supporting the rupee. "The domestic market has concluded the week with consistent recovery. The anticipated reduction in risk-free rates, coupled with the correction in the dollar index, are facilitating fund flows back to EMs. FIIs, whose selling activity has been waning, are becoming net buyers, driven by dovish signals from the US Fed, which suggest the possibility of two rate cuts this year."

Despite global uncertainty, including rising trade tensions, Nair believes improving domestic economic indicators, valuation corrections, and expectations of strong corporate earnings are fueling optimism among investors.  

Stock markets end week on a high

Indian equity markets ended the week on a strong note, with the Sensex surging 557 points to close at 76,905, while the Nifty 50 climbed 159 points to finish at 23,350.  

Oil & gas, media, and banking stocks led the rally, helping the Nifty comfortably cross the 23,300 mark. The strong performance reflects growing investor confidence, supported by improving macroeconomic conditions and an upbeat outlook for the Indian markets.

(With inputs from agencies)